This post is a continuation of a previous post aiming to provide a basic understanding of demand and the relationship between price and quantity demanded.
First some repetition: demand is the decisions and behavior of buyers in a market. The law of demand states that when the price of a good falls – the quantity demanded increases and vice versa. The market demand for a good is the sum of all the individual demands for a good. If this sounds unfamiliar to you then I recommend you go back and read my previous post on demand before reading on.
An important distinction to be made is how to differentiate between a shift in a demand curve and what is simply a movement along a demand curve. As you might recall demand can, and often is, presented graphically:
The curve in the picture shows how many apples Daniel wants to buy at different price points. As price increases he demands fewer apples. A movement along the demand curve is simply how the consumers respond to a change in price. This is more formally referred to as a change in quantity demanded.
A shift in demand is instead when some factor, other than price, causes a change in the quantity demanded. For example, imagine that researchers suddenly discovered that all apples are poisonous, more than likely this would lead to Daniel (and many others) consuming fewer apples. The calculation in the picture above would change so that Daniel would demand fewer apples at every price point. Bringing about a shift in the demand curve rather than a movement along it:
Trying to list all the possible factors that could affect demand is more or less a hopeless exercise – just try and imagine everything that goes in to your own decisions on whether or not to buy a certain good. There are however a few more commonly occurring factors that bring about a shift in the demand curve:
- A change in income. Whenever the income of consumers decrease they have less to spend in total and hence they will likely spend less on some – or all – goods.
- A change in the price of related goods. Many goods have substitute goods, that is another good that can replace the consumption of a good. In the case of apples you might be willing to buy pears instead if the price of apples suddenly increases. Reversely, if the price of pears increases it will likely bring about an increase in the demand for apples. Another category of related goods are complementary goods. Complementary goods are pairs of goods that are often used or consumed together – like cars and gas, bread and butter, or toothbrushes and toothpaste. Whenever the price of a good increases the demand of its complementary good decreases. If the price of bread increases you’ll likely consume less butter.
- A change in tastes. All people have tastes and they are not necessarily consistent over time. Most apparent is perhaps changes in trends and fashion that bring about large scale changes in taste in a market. One year it’s all about wearing skinny jeans, next thing you know wearing skinny jeans is a telltale sign that you’re out of fashion.
- A change in expectations. Predictions about the future can have a huge effect on the demand for goods. Just think of how people rushed to buy toilet paper and other necessities when the Covid-19 pandemic hit: people foresaw a great lack of toilet paper in their immediate future.
- A change in the size and structure of the population. A large population means relatively higher demand for all goods and services. Hence, any change in the population will also bring about changes in demand. For example, many western countries have ageing populations which brings about an increase in the demand for goods and services required by the elderly – like health care and boules courts.
Using this framework can be a great tool for analyzing how the market in a board game functions. As I’ve written before thinking of players as buyers in a market can open up some interesting doors. Likewise, you can consider what happens in your game when the demand for resources in your game changes.
For example, it is not uncommon for games to increase the income of players during a game. Economic theory tells us that when income increases so does the demand. Hence, you can safely draw the conclusion that increasing the income of players will inevitably lead to them acquiring more resources. Thus, if accumulating resources in your game is one of its core mechanics and all resources are easily attainable then your game will likely snowball for whoever manages to be the first to get more income than the other players.
Trying to determine whether or not any of the resources in a game are substitutes or complements can also be very useful to optimize your economy. If you know that two resources are substitutes then you should always try and set the price of those goods in tandem. If the price of either good is relatively high then this will lead to a drop in demand for it – worst case it becomes useless. Finding complementary resources can be equally important. Just like substitutes the price of the goods are connected – when you raise the price of a resource the demand for its complement will fall.
Expectations about the future can be an interesting way for designers to alter the demand for resources during the course of a game. I.e. if you can change the players expectations then you will also influence demand. One way could be to introduce event cards that introduce new problems or threats in the game. To tackle the problem players might new some resource that they have previously ignored – bringing about a radical change in the demand for it.
These are just a few examples of how you might utilize this framework. I’m convinced that there are a multitude of other ways you could use it to analyze the economy in a game. If you have more any more thoughts on how to apply it please feel free to leave a comment below.