Sold For A Shekel - Lessons on Supply & Demand from 2 Kings 7:1-18

Chapter 3: Price Adjustment

In this chapter, we will discuss the concept of price elasticity using the account of the famine in Samaria. Price elasticity refers to how much the quantity of a product demanded changes when prices go up or down. Understanding this concept can help us see why prices skyrocketed during the famine and then dropped dramatically when supplies increased after the Aramean army left. Let's explore how these changes impacted the lives of the people in Samaria and how they relate to broader market cycles throughout history.

During the famine in Samaria, prices were incredibly high because food was scarce. In 2 Kings 6:25, we read, "And there was a great famine in Samaria: and, behold, they besieged it, until an ass's head was sold for fourscore pieces of silver, and the fourth part of a cab of dove's dung for five pieces of silver." This situation perfectly illustrates how scarcity affects prices. When people need something urgently—like food—they are often willing to pay much more for it. In this case, the price elasticity of food was low; even at extremely high prices, people still demanded it because they had no other option. The demand for food remained high despite the outrageous costs.

When the Aramean army fled, the situation flipped. As we discussed in Chapter 2, the sudden influx of food changed everything. In 2 Kings 7:1, the prophet Elisha predicted, "Thus saith the Lord, To-morrow about this time shall a measure of fine flour be sold for a shekel, and two measures of barley for a shekel, in the gate of Samaria." This proclamation illustrates that, with the return of food, prices would dramatically drop. The sudden increase in supply caused the price elasticity of food to become much more favorable. When supply is abundant, consumers can afford to buy more without spending too much. Thus, lower prices lead to higher demand, which is a classic example of how price elasticity works.

In a market with low supply, as seen during the famine, people were desperate enough to buy at any price. However, when the supply increased, prices dropped quickly, and consumers reacted positively. They were now able to purchase food and essentials at a much lower cost, which reflects the elasticity of demand during that time. The relationship between price changes and consumer behavior was clearly visible: as prices fell, demand increased, and people could finally obtain the food they needed to survive.

The concept of market recovery cycles can also be seen in historical contexts. After times of severe scarcity or inflation, such as the famine in Samaria, markets often experience recovery as supply becomes more stable. For example, let's look at the Great Depression of the 1930s. In those years, many people struggled financially, and prices for goods dropped significantly due to low demand and overproduction. Eventually, with government intervention and the economic stimulus from World War II, the economy began to recover. Prices stabilized, and people returned to the market to buy goods, showcasing how a market can shift from scarcity to abundance as conditions change.

Another historical event we can analyze is the agricultural market recoveries following natural disasters. After a drought or a flood, the supply can plummet, causing prices to soar. However, once the conditions improve and farmers can produce crops again, prices will usually fall as food becomes more available. This cycle mirrors what happened in Samaria: a challenging pressure from scarcity was followed by relief from increased supply, leading to lower prices.

To understand these dynamics further, consider how businesses respond to changes in supply. For instance, if a popular game console is released and initially, there is not enough for everyone who wants one, prices might rise significantly on secondary markets. However, once more units are produced and made available, prices tend to drop, allowing more consumers to afford it. The initial high demand paired with low supply leads to a situation of high price elasticity, but as supply catches up, elasticity shifts toward a more stable, lower price point.

In conclusion, the narrative of Samaria provides a powerful illustration of price elasticity in action. From extreme scarcity marked by soaring prices to the relief of increased supply leading to a drop in prices, we see how demand responds to changing market conditions. Additionally, historical examples of market recovery show us that after periods of difficulty, economies can rebound, often rapidly, once supply stabilizes. Understanding these economic principles can help us better appreciate how markets work and how crucial it is for both consumers and producers to adapt to unpredictable changes in supply and demand.