Where Can I Pahhhk My Cahhh?
Published: Friday, March 1, 2013
Updated: Friday, March 1, 2013 14:03
Last week, we examined the market for clothing here at Holy Cross, and how the prestige of wearing brand name clothing created a situation where as the price goes up people buy more. Well I’ve been in the “market mood,” so let’s take a quick look at another intriguing market: the market for parking passes at HC.
The market for parking spaces is an interesting one because much like the market in a Giffen good scenario this is rather different than a traditional supply and demand equilibrium. Too much economic jargon you say? Don’t worry, I’ll explain everything shortly.
The law of demand states that as the price of a good goes up, you buy less. The law of supply (quite predictably) is the opposite: as the price of a good suppliers are willing to supply more. Makes sense right? Okay, but that is assuming that both sides have control of the quantity supplied or demanded. For some goods there is a fixed demand that doesn’t change no matter what price is charged (think broad necessities like food or water).
There is a similar scenario to supply, the supply curve can be fixed when there is a limit to how many goods can be sold. This plays out in neighborhoods with a fixed number of houses, ballparks with a fixed number of seats, and parking lots/garages where there are a fixed number of spaces. That is the exact scenario that plays out here at Holy Cross, there is a set demand that follows the predictable law of demand, although if we wanted to make things really interesting we could look at the market for in-state students versus out of state students (don’t worry, we won’t).
One other level of interest in this situation is the price. The price for a parking pass for resident students $150.00, while 24 hour parking privileges for students living off campus is $350. Why the huge discrepancy? Good question, the supply is fixed so the demand curve intersects it at one point. The demand can shift in one direction or the other, but the supply cannot shift unless new parking lots are built. The importance of this is that there is one price depending on the demand for parking spaces. Let’s hope that the transportation office used economic principles to determine the equilibrium price of $150. At $150, let’s say “Q1” parking spaces are demanded, and luckily enough “Q1” parking spaces are supplied. If the price goes up to $350 per spot then “Q1” spaces are still supplied but “Q2” spaces are demanded. Basically the transportation office is charging a higher price to create a disincentive for students living off campus to have 24-hour privileges which would otherwise go to resident students.
Well that certainly was fun, but wait there is still one other item of interest! Parking tickets are $50, which would cause any economics worth his salt to think about how many times $50 goes into $150, or $350. Well you can get three tickets and then break even with buying a parking pass as a resident student. That’s not really worth it because after you get one ticket you already paid a third of what parking for the year would cost. In other words you got a day of parking for a third of a year of parking privileges. What if you live off campus though? You don’t really need to 24 hour parking privileges and that price is pretty steep. That ticket suddenly seems more attractive considering it may be a one or two time violation, which is all you would pay for. Well the transportation office thought of that too and set a limit at six violations before you get towed, which probably has an additional cost. So before you break even by racking up tickets remember you won’t just get a slap on the wrist, you’ll have to get your car out of an impound lot.
There you have it, another look at an interesting market here on campus. I bet you never thought much of that while you struggled to find a parking space near your dorm did you? Got an issue you are passionate about and want to learn more? Email me and I’ll do my best to address it in my next column!
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