Econ561 - Change of Two Equilibrium States as It Relates to the Vinyl Record Industry

The purpose of this paper is describe the change of two equilibrium states as it relates to the Vinyl Record Industry. Over the past few years the music industry sales has lagged in almost all formats CD, digital and streaming however there has been on sector that is growing. “9.2 million records were sold in 2014, according to Nielsen Soundscan data, a growth of 52 percent over 2013 and millions more than vinyl sales in the ’90s and early ’00s” (Palermino, 2015). Furthermore, according to President of Record Products of America Bob Roczynski, “Vinyl’s resurgence has been a real-life example of demand outstripping supply” because there have been no new record presses produced since the early 1980’s. The rise of record demand is also an example of market efficiency, where consumers and producers, behave with their own best interest, seek an exchange at a market price that achieves efficiency, given competition and the absence of market failures.

Due to various advances in technology industry, such as cassette tapes, CDs, mp3 and now streaming consumer preferences caused the demand of vinyl drastically for decades. This shifted the equilibrium price down for decades. The downward shift in the price also led to a surplus in supply of records as evident by stopping by any thrift store, used record shop, or garage sale. However over the past few years the consumer preferences of a large sector of music consumers seem to shifting again. In the mp3 and streaming world of today it appears that a large portion of music consumers are seeking tangible ways to consume their music as compliment to downloading and streaming. According to Stephen Godfroy, director and co-owner of Rough Trade, “the growth of record sales is driven by younger listeners looking for a physical product to complement their digital music collection.”

Due the rapid rise in demand, record presses are having trouble keeping up the demand. When suppliers are