Here is a continuation of our series on what factors affect the price of beer.

The law of supply and demand seems like a simple concept.  Almost everyone takes the idea for granted, but it’s amazing how little we actually think about it.  In a consumer based economy, this law is a pillar to purchasing.  Simply stated, there is a certain amount of a given commodity; let’s say beer could be the one we’ll talk about.  There is not an infinite supply of a given beer.  Naturally, this is irrelevant if no one wants said beer, but the real sticking point may be seen when a lot of people want the beer.  Ideally, the amount of beer will meet (or come close to meeting) the desire for it.

The reality is that if more people want a given beer than there is of that beer, brewers are in a position to charge, within reason, what they want for the products.  The ideal position for a brewer seems to fall firmly within this sphere of economic situation.  Of course, care must be taken not to extort nor to alienate one’s customer base, so brewers must figure out how to balance the supply and demand of their products.  An increase in output may or may not be the solution for the brewer; aspirations play a major role here.  Let’s assume that the brewer wants to expand.  Where will the money come from?  Well, raising the price of that beer seems to be one of the most direct and viable solutions.  Even when the new production capability is met, the price of that brew is not likely to go down.

But the brewer is not the only player in the situation.  Let’s say the distribution network and individual store owners are allowed a discretionary amount of room to further capitalize on a beer’s popularity.  It’s shocking how much can be added when it comes to these various layers of price adjustments.

Nevertheless, people are often willing to pay when the beer is limited or special, and this can play a big role in dictating product prices.  Granted, it sounds like a policy of extortion, but no one is forced to buy any given beer.  Where demand falls, so can price.  The reality remains that we are consumers in a consumer-based economy that has a limited (sometimes very much so) supply of beer.  Whatever the case may be, we are often willing to price that price.  Not that it’s necessarily wrong to do so, I’m just saying that our desire for a given beer helps to dictate what the beer will cost.

But it’s not even that simple.  Supply is not simply related to the amount of beer but also its location.  I live in California, and if I want to buy Three Floyds brew, I can stock-up when I go home to Indiana (and raise demand by doing so).  I can also have my little bro ship some to me.  I’ve got the demand, he’s got the supply.  The problem is that for my supply, I’m going to have to pay for some shipping.  Most people who have purchased beer this way will tell you it isn’t cheap.  What about places where I don’t have a reliable purchaser for my beer?  I’ve still got an option or two, but now I’m really going to have to get creative and pay.

Beer trading can be a very nice way to meet the demand for beers that I can’t get.  But I’m still running into the issue of shipping, thus increasing the cost of the beer I buy.  Trust me, there is a demand for this out there.  Of course, it doesn’t make the beer any cheaper.

I’ve saved the most heinous option for obtaining the hard-to-find beer for last: eBay.  You don’t have to look hard or far on eBay to see that you have the option to get almost any beer that you demand from a very limited supply.  In terms of simple economic ideology, you are going to pay out the ass.  Why?  The lower the supply and the more the demand, the better position the seller.  You can buy Alesmith’s Barrel aged 2007 Decadence for the starting bid of $199.00 or buy it outright for $299.00.  Don’t worry, you get the bonus bottle of 2007 non-barreled for no extra cost.  The original cost for the beer was probably under $20.00.  However, if there wasn’t a demand, this beer would not be nearly the same on price.

There are other factors for consideration, but demand can really play a role in the normal marketplace…even when you don’t consider eBay.