The trick of discounted treats

Halloween offers a perfect opportunity to explain the economics of supply and demand.

I love Halloween. Not only do you get to see all the neighbours dressed up, eat copious amounts of candy and forget about homework for the night — it’s also one of the best times of the year to teach children the magic of supply and demand in a way they are sure to understand and remember.

Start by taking your kids to the store (or showing them a store flyer) in the next few days and get them to take note of the prices of Halloween costumes, treats and decorations. There will likely be a flurry of activity in the store in the seasonal items section leading up to October 31, which you’ll point out (or tell them about when you get home). Then, return to the store with them on November 1 or 2 and ask them to tell you what’s different. Are there still crowds of people buying Halloween stuff, or are those shelves much less busy? And are the prices the same, or cheaper?

(To make the experience more memorable, let your kids buy one item under a certain amount, say $5, each time. They’ll notice how much farther their $5 can go post-holiday.)

The reason for the difference, you will explain, is supply and demand. Before Halloween, demand is high: everyone is stocking up on supplies in preparation for the upcoming holiday. But supply is limited: once the store sells out of a particular costume, it probably won’t restock again until next year. When the demand is greater than supply, stores can charge more and people will willingly pay those higher prices.

After Halloween, demand is low: most people bought what they wanted for the big night and the need for giant spider webs or ghoulish treats drops considerably. While there may not be a huge supply of Halloween stock remaining, whatever is left almost certainly exceeds the paltry demand, so the store offers heavy discounts to clear its shelves quickly.

When demand exceeds supply, prices are high. When supply exceeds demand, prices are low.

My son, aged nine, and I refer to this economic law often. For example, when he wants to buy a video game he now understands that the new releases that fans are clamouring for are the most expensive (upwards of $40), while the games that have been around for a while can be bought much cheaper because demand has dropped off. While this doesn’t always convince him to wait to spend his money (several months ago we actually stood in line to get a new Zelda game on the day it was released), it does give him pause. He can weigh the benefits of having the game right away versus the benefits of saving money (which he can put toward more game purchases!).

Keep the conversation going

Do you try to shop for your kids at end-of-season sales to take advantage of supply and demand?

 


Disclaimer

The views and opinions expressed in this article are those of the author and do not necessarily reflect that of Chartered Professional Accountants of Canada (CPA Canada).

 

About the Author

Tamar Satov

Managing Editor, CPA magazine
Tamar is a journalist specializing in business, parenting and personal finance. She blogs regularly in this space with advice and anecdotes on her efforts to raise a money-smart kid.

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