The Hudsucker Proxy

Media Type: Film Clips Topic: Supply & Demand, The Firm

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This film chronicles the introduction of the hula hoop, a toy that set off one of the greatest fads in United States history. According to Wham-O, the manufacturer of the hoop, when the toy was first introduced in the late 1950s over 25 million were sold in four months. One scene from the movie clearly illustrates the difference between movements along the demand curve and a shift of the entire demand curve.

The Hudsucker Corporation has decided to sell the hula hoop for $1.79. We see the toy store owner leaning next to the front door waiting for customers to enter. But business is slow. The movie cuts to the president of the company, played by Tim Robbins, sitting behind a big desk waiting to hear about sales of the new toy. It is not doing well. The store lowers the price, first to $1.59, then $1.49 and so on, until finally the hula hoop is “free with any purchase.” Even this is not enough to attract consumers. The toy store owner throws the hula hoops into the alley behind the store.

One of the unwanted toys rolls across the street and around the block before landing at the foot of a boy who is skipping school. He picks up the hula hoop and tries it out. He is a natural. When school lets out, a throng of students rounds the corner and sees him playing with the hula hoop. Suddenly everyone wants a hula hoop and there is a run on the toy store. Preferences have changed, and the overall demand has increased. The hula hoop craze is born. In economic terms, we can say that the increased demand has shifted the entire demand curve to the right. The toy store responds by ordering new hula hoops and raising the price to $3.99, which happens to be the new market price after the increase, or shift, in demand.

The scene reminds us that changes in price cannot shift the demand curve. Shifts in demand can only happen when an outside event influences human behavior. 

*Professors*  One of the hardest concepts to get across in a principles of economics class are changes in demand versus changes in quantity demanded. This short scene from The Hudsucker Proxy solves that problem in a humorous way. I recommend that you show the clip and then ask your students to help you construct the appropriate demand and supply curves to illustrate how the price changes in the clip.

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