Egghead Economics

I was at the grocery store today and noticed the following sign:


Indeed, the sign’s warning was true.  Half a dozen eggs, which I paid $0.99 just a few months ago, were now selling for $2.  What’s also interesting is the egg beaters and egg substitutes were running low.

This little anecdote of a grocery store in New Hampshire is a snapshot to the rationing power of the price mechanism.  A shortage of a commodity caused its price to rise, making it relatively more expensive.  Conversely, substitutes were now relatively less expensive.  This change in the price ratio caused some people to choose substitutes over eggs, thus leaving eggs for those who still valued them at the higher price.  In fact, people’s actions have adjusted to take into account the shortage as if they were guided by an invisible hand…

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