Black Friday Sales

Hello everybody!

This week for my blog post, I have decided to talk about Black Friday sales, and how they do not make sense in theory, but make sense in practice. In micro, classes learn that demand and supply drive the equilibrium price of a product. In theory, Black Friday is a time, after thanksgiving, in which people are predisposed to start buying Christmas gifts for their family. Therefore, the demand of products which will be later used as gifts rise. However, because there is no evidence that supply rises to offset the demand, the price should, in theory, rise. Black Friday sales run against the classical theories behind supply and demand.

So what is the reason for a sale after the demand of products rising? My hypothesis is that Black Friday sales give producers an opportunity to reach new markets. People who would not likely be in the market to purchase a specific gift may be more likely to if the product shows up on Amazon's homescreen. Critics to my hypothesis may argue that lowering the price increases quantity demand. However, if producers were to artificially lower the prices to achieve a higher quantity demanded, then shortages would quickly ensue. Therefore, there must be some type of supply plan for producers, or attempt to move most of their product on that one day.