According to Frank, the demand law holds that when the price of a good increases, there is a resultant reduction in the demanded quantity of the good in question. An upward sloping demand curve can be derived from two hypothetical goods, inferior goods, and Veblen goods or luxury goods. The increase in ticket prices is expected to result in a decrease in demand, but the upward nature of the demand curve can only be attributed to two circumstances.
The increased demand for tickets leading to increased prices is due to the Veblen nature of the good, in this case, the club. Consumers perceive that an increase in price is a result of superior services and exclusiveness of soccer; hence they are willing to forego utility from other soccer clubs and pay an extra price for this club. Alternatively, the increase in average sales is due to an upward shift in the demand curve. This occurs when consumers increase the quantity of demanded soccer tickets at the given price, causing an increase in equilibrium quantity. Shifts in fashion and tastes, a rise in the number of buyers, or increased income may result in high demand for a given good.
Sloman argues that a price floor occurs when the price is artificially held above the equilibrium price and is not allowed to fall. Governments and private businesses maintain the price floor. For example, in the case of fair trade, manufacturers set prices for products above the equilibrium price and then instruct retail stores that the price may not be lowered or the store would not be able to sell any of the manufacturer’s products. Stores will, however, violate this due to surplus in the market by offering extra services like trade-ins, after-sale services, or more services for the same price. These are the mechanisms in the market that result in rearranging the market process to equilibrium.
A price floor set above the market equilibrium price has several implications on the economy. For example, when the price of a product increases, consumers’ purchasing power may reduce, with some of the customers even opting to drop the purchase of such a product.
In the case of suppliers, they may be motivated to increase their production to take advantage of the guaranteed high price. Consequently, we may experience a glut of the product in question within the market. If at all the price floor is to remain in the long-term, there is a need for the intervention of the government to do away with it. However, in case the set price floor is way below the ‘market equilibrium price,’ this does not affect the market. Producers and suppliers are in the market to maximize their return; they will therefore produce at the market prices.