Questions tagged [price]

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What combination will reduce consumption? Inferior/Normal good — Rebate/ No Rebate? All of the above?

I am having trouble with this course question: The government wants to decrease consumption of alcohol, so they apply an alcohol tax. Which condition will lead to a decrease in consumption? a. ...
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1answer
25 views

Why do firms reduce both price and supply during a recession?

Could anyone explain why firms reduce both price and supply of goods and services during a recession with a practical real life example for better understanding ?
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45 views

About the 9 tests on Index number theory to evaluate the efficency of the different types of price indexes

Correct me if I'm wrong, I've seen a section in Wikipedia about Index number theory and I've understand it as "if an index x (Laspeyres, Paasche, etc.) satisfies all of this test, then it's 100% ...
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36 views

Price/value with and without consideration of resale

When thinking about various economic phenomena I have often found it useful to separate out the value of an item purely for its own sake from the value when you also consider the fact that you may ...
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1answer
34 views

Prices in 'The Wealth of Nations'

While reading 'The Wealth of Nations', I have come across terms like nominal price, consumer price, actual price, exchange price. What each means? What is the difference between them? Note: I am ...
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1answer
38 views

Fall in price of sugar affects price and quantity of candy [closed]

Using the supply and demand model, explain and illustrate how the price and quantity of candy would be affected by sugar prices dropping, starting from the equilibrium point. Am I right in stating ...
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1answer
23 views

Is 'price hike' synonymous with 'price rise'?

Since my childhood I have a belief that in economics price rise and price hike synonymous with each other. Moreover, the Collin dictionary strengthens by belief: Hike But what you experts have to say--...
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48 views

Better Model for Dynamic pricing - Stackelberg model or Bertrand model

Objective - I am building a dynamic pricing tool for airline tickets which will consider the competitor prices. Taking competitor price as reference, this tool will price the ticket. Also instead of ...
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1answer
51 views

Equivalence of producer surplus areas

I really can't understand how the sum of the rectangles leads to the sum of the triangle. My book's(Chapter 12, page 430) explanation is: Equivalence of these areas can be shown by recognizing that ...
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1answer
41 views

Why are constant price elasticities reported?

Price elasticity of demand $\mathrm{e_{D,P} = \dfrac{dD}{dP}. \dfrac{P}{Q^*}}$ clearly depends on the levels of price and quantity. Then why is everywhere (research papers, textbooks etc.) a constant ...
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15 views

How to find equilibrium price with inverse demand? [closed]

So I know how to do it when it is a function of Q but as a function of P I'm confused about what steps I have to take demand: p = 1000-0.025q supply: p=150+0.033q
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1answer
27 views

From the aggregate supply equation to the definition of inflation rate

By definition the inflation rate is $$\pi=\dfrac{P-P_{-1}}{P_{-1}}\cdot100\%$$ or could be defined in terms of the consumer price index CPI, but in this case I think the former is the one to consider....
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192 views

consumer surplus decreasing

MRU has the following question on a quiz: Suppose the government forced all bread manufacturers to sell their products at a “fair price” that was half the current, free-market price. To keep it ...
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32 views

diverging price indicators

Suppose that PPI is increasing while CPI is decreasing. interpereting this is somewhat tricky because different contexts are at play: CPI is largely domestic driven while PPI has global determinants. ...
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1answer
20 views

What's the minimum number of datapoints in order to run a diff-in-diff?

I was thinking about running a diff-in-diff with fixed effect in order to deal with a panel data experiment. The problem is that I don't know how many datapoints I need in order to the experiment be ...
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28 views

Market clearing price and dual variables in auctions

Suppose the allocation of an auction (or a market) is defined by the solution of a linear program. Then it is known that the associated clearing price is given by the dual variable associated to the ...
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2answers
363 views

What does price embody ? Do we constantly undervalue some type of products?

I'm not sure to fully get the meaning of prices. If I understand well, there are two drivers of it : The theory of demand and supply and thus prices are driven partly by the utility that agents get ...
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92 views

Does elasticity make sense for different levels of prices? If not, how can we fix that?

Let's say we know that our customers can't make sense of a raise in 5% of the price. It's too little for them to notice. However, an increase above 10% is easily noticed. If this is true, different ...
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12 views

Does it make sense to calculate price elasticity in respect to some percentage?

I was trying to calculate how much the price of a product impacts some company I'm analysing. At college, we learn that the price elasticity of demand is the percentage change in demand divided by the ...
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1answer
181 views

Elasticity of demand

I'm reading a paper from Pindyck (1988) where $$P_t=X_t-\gamma Q_t.$$ $P_t$ is the price, $X_t$ is the demand state variable, $Q_t$ production and $\gamma\geq0$ is apparently the ''(constant) demand ...
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17 views

Application of Laffer Curve on the price of Goods and Services

The Laffer Curve shows the relationship between Tax-Rates and the Amount of Tax Revenue Collected. Can't a similar principle be used on the price of goods? To elaborate: The total revenue of a firm ...
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1answer
32 views

EmpirIcal evidence on effects of price floors and ceilings

In introductory microeconomics, when studying partial equilibrium, we are introduced to the idea that a price floor will cause excess supply and a price ceiling will cause excess demand. How strong is ...
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150 views

Why is price plotted as a dependent variable?

Watch the video from 5:35: law of demand In the description, the narrator says that "demand depends on price". However, in the plot, he is keeping price "P" as the dependent ...
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1answer
77 views

Solving problem for optimal price (maximize profit) *attempt inside*

Let a demandfunction be defined as $D(p)=B-bp$, where $b,B>0$. A firm has some production cost, $c$, and can set the price $p$ under the constrain given by the Demand. What is the optimal price? ...
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1answer
47 views

Examples of bounded, positive, inverse demand curves

The three most common examples of demand curves I am aware of are \begin{align} Q&= b - aP,\\ Q&= bP^a,\\ Q&= b e^{-aP}\\ \end{align} The first being our classic linear demand curve, the ...
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14 views

Measure of value of a product expressed as a price using the currency of the domain country (e.g. USA)

I do not really know much about economics, but I need to do a price comparision of a certain product between countries in Europe. The product is a pack of specific brand of cigarettes. We know that ...
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103 views

Externality and Output

In a positive externality, can government just set the price to the socially efficient price instead of a subsidy to correct an externality?
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24 views

Price elasticity of demand of CES

Anyone would like to help me show the following ( or a book/paper reference would be a great help) " The price elasticity of demand is equal to $\sigma$ for the demand function of CES preference,...
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1answer
98 views

Measuring effects of degree of (buyer) competition on price: references

I would like to examine the effect of degree of competition (market power?) among buyers on price of a product. I have data on product price, number of buyers with nonzero purchases and a couple more ...
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1k views

What is the mechanism that triggers a stock price change?

When discussing with my son basic economics (how the price is driven by demand, among others), I came to wonder which exact mechanism triggers a price change in a stock exchange. In everyday life, ...
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1answer
80 views

Why, in general, do product or service prices rise in time? [duplicate]

My question is simple: Why is it, in general, that the prices of products or services (regardless of demand and supply) are always on the rise in western society? For example, the rent we pay ...
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2answers
290 views

What's a “correct price” really? Does it exist?

Lately I've been thinking about the concept of price setting in market economy. There are various (perhaps naive) view on this such as: The price is always the optimal for the buyer and the seller. ...
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3k views

Does a store suffering increased theft generally cause higher prices?

If a store suffers an increase in theft, will it generally lead to higher prices at that store? My answer is that prices should have already been set to maximize the trade off between profit-per-sale ...
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2answers
124 views

Terminology, is elasticity used as “mean elasticity”?

Given a demand $q$ and a price $p$ sutch that $q=q(p)$, the elasticity of demand is given by, $\epsilon = \frac{p}{q}\frac{dq}{dp}$ which depends on the price. But, when reading papers about ...
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1answer
63 views

Multiplant Monopoly With Third Degree Price Discrimination

I am trying to do an exercise with a Monopoly Firm with 2 production plants that supplies 3 different markets. I know how to do every case (Multiplant monopoly or third degree price discrimination), ...
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1answer
42 views

Price Changes in Factor and Product Markets

I think something is wrong in my reasoning, and I can't really find out what it is Lets say the supply of labor decreases in a market. That would mean that the wage rate would increase in that market....
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1answer
646 views

Why is the graph of unitary elastic demand a hyperbola?

My teacher said that the graph of unitary elastic demand is a parabola: But i fail to understand how in a hyperbola the percentage change of price and quantity demanded remains same. Can someone ...
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38 views

Why doesnt Law of Diminishing Marginal Utility not affect price effect?

Ok so in my textbook, it is given that the downward slope of the demand-price curve is justified by three factors: Law of Diminishing Marginal Utility Income Effect(Real income) Substitution effect ...
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2answers
57 views

Calculating price elasticity by asking a “this” or “that” question

Let's say 2 goods exist: A for 10 and B for 20 (B is more premium in this example) If I decrease the price of both goods by 10% and ask: "Do you prefer A for 9 or B for 18 " What sort of insights (...
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1answer
54 views

Can the demand curve be a rectangular hyperbola, but $E_D \neq 1$? [closed]

So, I am given the next table: I am asked to find $Q_D$. So the prerequisites to find $Q_D$ is that the price must change, and all other factors of demand must be steady. So, I can find the $Q_D$ ...
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17k views

Why is the oil future price negative?

I don't understand why the price of oil futures went negative today. News say it is because sellers cannot sell it. But, why don't they just hoard it until the coronavirus crisis is off? Why don't ...
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73 views

How to calculate the maximum willingness to pay? (Reservation price)

I have to solve the following exercise. I cant figure out what I have to do know. I hope i can get some help. Suppose you have the following utility: $U (x_1, x_2) = 4x_1 ^ .5+2x_2 ^ .5$ and you have ...
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4answers
191 views

What does economics say about “price gouging” during an emergency?

Many states have laws against "price gouging" during an emergency. Are these laws counterproductive? Take the current situation with toilet paper and water. When someone sees rolls of toilet paper ...
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1answer
422 views

How to determine price per unit and quantity sold of product from financial statement

Situation I hope I'm asking in the right place. I'm writing a paper on the application of quadratic functions in economics and intend to use the Total Revenue function as well as the Profit function ...
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1answer
28 views

Unit Elasticity Calculation Question

I'm struggling with a math concept dealing with unit elasticity at an undergraduate textbook level. In most problems, we are given a starting price and an ending price as well as corresponding ...
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1answer
50 views

Why do we have autarky price of mud pies equal to 0.5 of cheese, while it must be zero?

(It's assumed that we work with the Ricardian model) Absurdtopia is an autarky. Production of 1 mud pie requires 1 labor, while production of 1 cheese requires 2 labor. We know that price of 1 mud pie ...
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42 views

Are short-let platforms really contributing to rising rent prices?

Short-term rent services such as AirBnB are often criticized for eroding the communities by increasing rent prices for locals: ... as short-term letting transfers much-needed housing from the ...
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1answer
53 views

Depreciation of local currency and its effect on prices

I have problem with an article Lee H., C. Park, 2013, International Transmission of Food Prices and Volatilities: A Panel Analysis. Authors wrote: Difference in log of exchange rates (LOC/ $)- As ...
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1answer
22 views

Renewal of multiple notions of value in contemporary (green, public good) economy and are there general game theories?

https://en.wikipedia.org/wiki/Exchange_value mentions 4 notions of value: economic value, exchange value, use value, price. But this article also mentions that these are Marxian concepts and the ...
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582 views

EMH: Difference between market price and fundamental value?

I am confused by the relation between stocks market prices and fundamental (or intrinsic) values stated by Efficient Market Hypothesis. How these deviates regarding to efficient market theory or are ...