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Line 9: − − == Example: the NBA Draft == − − Let's begin with an example. Every year the National Basketball Association (NBA) holds a "draft" for each team to pick a college (or even a high school) player who wants to compete in the NBA. The worst NBA teams are allowed to pick first (that is, pick the best incoming players) in order to even out the quality of the NBA teams. That way the best new players go to the worst NBA teams, and hopefully improve them so that there is better competition in the NBA and the same teams (like Los Angeles) do not win the championship every year. − − There is a dilemma that often arises when a team is making its selection of a particular player: should the team pick (draft) the very best player available, regardless of the team's own needs for a player at a particular position, or should the team draft someone who fills a particular need on the team. For example, if the basketball team has good players at the position of guard but needs a good center, should it draft someone who plays the position of center even though the best player available for that draft selection is a guard? − − That dilemma presented itself to the Portland Trailblazers at a time when it had good guards, but needed a center. The best player available at the time of its selection was Michael Jordan, a guard, but the team felt it needed to pick a center to fill the bigger need of the team. It decided not to pick Michael Jordan and selected a center/power forward named Sam Bowie instead. The next team in the draft, the Chicago Bulls, then selected Michael Jordan and he eventually led it to six NBA championships. Sam Bowie struggled in the NBA and never attained the level of success of Michael Jordan, who many feel was the greatest NBA player ever. − − What does economics teach us about the decision by the Portland Trailblazers? At the time of its decision, the team knew that there was a greater "market" demand for Michael Jordan than for Sam Bowie. Had the team used economic analysis, it would have realized that Michael Jordan's "value" was higher due to the greater market demand for him, regardless of what the Portland Trailblazers' specific needs were. Portland could have picked Michael Jordan and traded him for Sam Bowie '''''plus another good player''''', or Portland could have "traded down" in the draft and obtained value in addition to still drafting Sam Bowie later in the draft (because he would still likely have been available). But the Portland team leaders did not view the selection in terms of the "market", but rather in terms of the team's own particular needs. This choice became what some call "the single most colossal blunder in the history of basketball."<ref>http://www.bigbluehistory.net/bb/bowie.html</ref> − − The moral of this story: learn to look beyond your own situation when making buying and selling decisions. You may think a particular house is the best thing in the world, but if the market values that house less than you do, then you'll lose money if you buy it based on your personal preferences rather than market demand. − − '''''Postscript''''': Sam Bowie himself displays a free market attitude without regrets. "If I had known that Michael was going to become the greatest player of all-time, I'd have chosen Michael over myself, too. That's hindsight. ... I have a wife of 21 years and children ages 17, 11 and 8 ..., and to say that every day's a holiday is an understatement."<ref>http://sports.espn.go.com/nba/columns/story?columnist=stein_marc&id=3019727</ref> Meanwhile, Michael Jordan has had problems caused by his stardom, and he was unsuccessful himself after he switched teams late in his career.
→Example: the NBA Draft: trim
This time, we are going to focus on other aspects of “demand”.
This time, we are going to focus on other aspects of “demand”.
== The Income and Substitution Effects==
== The Income and Substitution Effects==