I’m in the Netherlands and there is a horse butcher (paardenslagerij) around the corner of my house. Has been there since the seventies. The sausage is quite good, but much fatter than I’d expected. It’s also quite expensive which can make sense because scarcity, but not make sense since the demand must be fairly low. Based on total anecdata, I see mostly pensioners going here. And me.
> It’s also quite expensive which can make sense because scarcity, but not make sense since the demand must be fairly low. If demand is highly inelastic - as would be expected for something like culinary preferences - then price actually has to increase when demand is low: if you can sell to 3 people at 20$ or 5 people at 10$, you're losing money by decreasing your price.
Demand curves, regardless of elasticity, are always downward sloping: Higher prices lead to fewer units demanded.
Your statement implies control over prices: Firms with market power do not operate along the inelastic portion of a demand curve. This is a logical implication of profit maximization.
Before one can understand that, one must internalize the fact that as a seller, you cannot choose the price and the quantity sold independently. If you pick a price, you can sell the quantity demanded at that price. If it is too high, can't sell any. If you pick quantity, you can only sell all at a price people are willing to pay.
Assume a firm has market power (can pick price) and is operating along the inelastic portion of the demand curve.
If it charges a higher price, it loses some sales, but total revenue increases (that's what demand being inelastic means -- quantity sold falls, but percentagewise not as much as you increased the price, therefore, revenue, price x quantity increases). In addition, because cost is increasing in quantity (offering more for sale costs you more) and now you are producing less, costs go down. Therefore, profit, which is revenue minus cost, must increase. Therefore, if you were operating along the inelastic portion of the demand curve, you could not have been maximizing profits.
Therefore, firms with market power (can pick price) can only operate along the elastic portion of the demand curve.
If you are claiming demand for horse meat is a vertical straight line (which is not a thing outside of being a limiting case in econ 101), then lower demand means demand curves closer to x axis origin, i.e., price is determined simply by the supply curve. With a given supply curve (which are always positively sloped due to the fact that cost is increasing in output), lower demand means lower equilibrium price,
> then price actually has to increase when demand is low.
Demand falling cannot cause higher prices (keeping everything else constant).