Price Gouging

Some shoppers get upset when a dealer adds a "market adjustment" to the MSRP of a hot new car, such as the Toyota Prius or Ford GT. I don't see a problem with it--it isn't "gouging", it is basic economics. The price of something will go up as long as someone is willing to pay more, until demand recedes and balances against the supply of the product, or the amount of product increases and balances the demand. Early adopters pay handsomely for the chance.

Here is an interesting web page, put up to explain the pricing environment for the Ford GT: www.fordgtprices.com. Currently, dealers are marking up the sticker price by as much as $45,000. However, the web page believes that the prices will fall at a rate of about $25,000/quarter, based on the first 244 cars sold, and that the prices will decay until they are nearly at MSRP. (I'm bummed that this is, for me, an academic topic!)

For the Prius example, this article states that 7% of Prius buyers paid more than MSRP, and 68% paid no more than MSRP. That tells me that 68% of Prius buyers are firmly committed environmentalists, and 7% of them are greenie wingnuts. But comfortably middle class ones.

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