Improving demand calculations to diversify goods sold

Currently the game consists of four districts: Midtown, Murray Hill, Hell’s Kitchen and the Garment District. These districts each have demographic values; each district has a percentage of lower, middle and upper class citizens. These percentages affect the price the citizens are willing to pay for the goods sold in stores in the district.

Currently the effect is as follows: the more upper class citizens, the more they pay for everything.

This doesn’t make sense. It isn’t realistic. This suggestion offers a more realistic alternative based on economic theory which should not be too hard to implement.

TLDR: by assigning values to each good and citizen class, the game can assign not only prices but different demand to different classes. This should result in upper classes preferring expensive goods in exchange for a lot of money, and lower classes preferring cheap goods in exchange for less money, etc.
Also see the final paragraphs.

The theory of income elasticity
In economics there exists the theory of income elasticity. This describes the relation between the demand for a certain good and the income of the people buying it. Income elasticity is defined as a number and is calculated as follows:

income elasticity = (% change demand) ÷ (% change income)

The outcome of this formula is a number. Goods can be categorized in three different categories based on the outcome:

Inferior (negative outcome): all goods where demand decreases as income increases. These are good for which a better alternative exists. An example in this game would be cheap gifts, for which the alternative expensive gifts exists.

Necessary (outcome between 0 and 1): goods for which demand increases slower than income. These goods are necessary for survival but aren’t bought with disposable income. An example in this game would be fresh food, which is bought by all income classes.

Luxury (outcome higher than 1): goods for which demand increases faster than income. These goods are the opposite of inferior goods: they are goods for which an inferior good usually exists and are not necessary. An example therefore would be expensive gifts, as stated earlier.

Implementing this theory
To implement this theory, the developers would need to assign an income value to each of the classes. This would allow for each district (which each have different combinations of the classes) to have different incomes. Furthermore, the developers would assign an elasticity value to each good and a demand at a given median income. The game can then calculate the demand for a good by comparing the base price and price in the store and the demand at the base price and the income elasticity of the good.

An example
Let’s say the game uses a base median income of $50.000. Let’s also say we assign an income of €30.000 to the lower classes, €50.000 to the middle classes and €100.000 to the upper classes.

Let’s now say that Midtown has 5% lower class, 20% middle class and 75% upper class citizens.

We can now say the average income of Midtown is:
30.000 × 0,05 = 1.500
50.000 × 0,20 = 10.000
100.000 × 0,75 = 75.000
1.500 + 10.000 + 75.000 = $86.500

Now let’s say a store sells expensive gifts. The developers recognize these as luxury goods, and therefore assign it an elasticity value of 2. To balance the game the developers decide the base demand at the abovementioned income of $50.000 is 1.000 goods.

The game can now calculate the demand of expensive gifts using the income elasticity formula.

The difference in income from the base is: (86.500 − 50.000) ÷ (50.000) × 100% = 73%

An elasticity of 2 means demand will rise 2× the rise in income, or

73% × 2 = 146%.

Therefore, the demand for this store will be 1.000 × 1,46 = 1.460 goods.

How this practically affects the game
Currently the logic is as follows: the more upper class citizens, the more they pay for everything.

By using the math detailed above, upper class citizens can be made to pay more for goods deemed luxurious and less for goods deemed inferior. This will require the player to diversify their stores: stores in the upper class Midtown will have to stock more expensive goods, whereas stores in the poorer Garment District will have to stock more cheaper goods. This is a more realistic behavior.

While the math seems a bit complicated, the behavior created as a result makes sense and allows for the same level of experimentation as the current version.