On Beer and Economics

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Oktoberfest is a festival celebrated every year in Germany ever since 1810 when king Ludwig married princess Theresa and all the peasants were called to the celebration, what kind of festival you may ask? Well, for those who don’t know in the world today it is basically a beer drinking festival; a time when local German folk drink till they’re wasted, the Germans consider beer to be a staple like how the Americans consider beef… let’s just says its their liquid bread, exaggeration? I think not especially since they start the festivities with a twelve gun salute and ceremoniously opening the first keg of beer with a cry of ” O’Zapft is!” (” its tapped!” In the Austro-Bavarian dialect)

Now you may be wondering why I’m rambling on about how much the Germans love their festival so much. Well, during this years festival about 7 million beer drinkers gathered together to down about 15 million letters of beer, had they been sober enough they would have noticed that their largers, ales and stouts cost more than they did last year in fact your average beer at this years festival costs $13 which is 3.9% more than it did last year, inflation in Germany is currently at 1.5%.

Any normal person would be outraged at this drastic increase in beer price, not the Germans though, oh no, they keep buying the stuff no matter what the price. As a commerce student I know that there is one major factor determining the demand for a consumer product such as beer( non-essential good) and that is its price, when the price of the product increases its demand falls and when the price is reduced, demand rises; this theory goes out the window as far as Oktoberfest and the Germans are concerned. When there is a 1% increase in beer prices there is an astounding .3% increase in the demand for beer, this kind of thing falls under the category of what economists like to call the Griffin-paradox. It is a paradox because no one understands why people would demand more of a non-essential good when its price increases.

It wasn’t always like this, in 1810 it was celebrated because the people were invited to the celebrations of a marriage  while now its a beer drinkers mecca and economic wonder, and I think it is safe to say that until beer drinkers stop celebrating price hikes, Oktoberfest will continue pouring them on, so until then

Auf Wiedersehen

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