Questions tagged [supply-and-demand]
Supply and Demand is an economic model of price determination in a market. Demand refers to how much (quantity) of a product or service is desired by buyers. Supply represents how much the market can offer.
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Clearing price in a double auction market
I have been reading a paper on energy markets and I have stumbled upon double markets and clearing prices, which got me quite confused (bare in mind, I am relatively new to this topic). Quote from the ...
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Constant elasticity proof for log-linear demand curve
From Perloff 2008e solved 2.2:
Q: Show that the elasticity of demand is a constant e if the demand function is log-linear, ln Q=ln A+e ln p.
A: Differentiating with respect to p, we find that (dQ/dp)/...
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Everyone has the same marginal rate of substitution
I'm currently reading Varian's Intermediate Microeconomics and what struck me, is this statement on page 89 of the 8th edition.
If everyone faces the same prices for the two goods, then everyone ...
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Why should houses have the same price for a given supply
So I'm reading Varian intermediate microeconomics and in chapter one it's about housing. Suppose we have a inner ring and a outer ring in a city where there is a university. In the inner ring supply ...
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A weaker definition of local non-satiation can also imply indifference “curve”
Let $u$ be a continuous utility function on $\mathbb R^2_+\setminus\{0\}$. Consider the following three conditions:
Local non satiation says that for any $x \in X$ and $\epsilon > 0$, there exists ...
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Affordable reservation prices
An important theoretical construct in microeconomics seem to be reservation prices, i.e. the maximum price a person is willing to pay for something.
Consider a typical market basket of goods a person ...
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How does a division of a company spinning off from it's 'parent' company change it from a cost center to a profit center?
Reading an article about how many IT divisions of big companies in Japan, became seperate companies. The motivation is apparently to turn them in profit centers. Can anyone explain how becoming a ...
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The law of supply and demand - How does it work?
I've learned what the principle of supply and demand says, and would paraphrase it like this:
The price of a good is at equilibrium when supply and demand are
equal.
Or with other words:
The ...
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28 views
Understanding the gradient of the social cost curve in a market failure/ negative externalities diagram
Why does the social cost supply curve in a negative externalities diagram have a steeper gradient than the private cost to firms?
I assumed it should only be shifted upwards as the negative social ...
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Linear Homothetic Utility
A Homothetic Utility is where
$$
\forall x,y, \forall a \in \mathbb{R}_+: \ u(ax,ay)=au(x,y)
$$ (or its monotonic transformation).
A linear Homothetic utility is defined as $$
\forall x,y, \forall ...
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Why is demand curve always going down?
In many economic charts with demand and supply curve, people often say the demand curve goes down with more quantity. But I will give you a really practical example, why I think they are wrong.
...
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Why hasn't the huge increase in supply provided by Airbnb decreased prices?
Simple supply and demand economics would suggest that the huge increase in the supply of rooms to rent by Airbnb should have reduced the price of rental significantly in those cities where Airbnb is ...
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Trying to understand ceiling in supply and demand on picture
I am having one problem, which I do not understand. Let's assume the government applies ceiling price below the equilibrium price. I colored it red in my graphs.
Of course, supply would decrease, ...
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Will the third Heathrow runway fill up within 25 years?
From a Wired article published 9 June 2018 about the proposed third Heathrow Airport runway:
But Warnock-Smith1 warns that Heathrow will eventually fill up again unless air travel is redistributed ...
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WARP implies completeness, transitivity and thus rationalizability. What is wrong with the statement?
Let $A$ be a menu and $R$ be a complete and transitive binary relation. Define choice correspondence generated by $R$:
$$c_R(A)=\{x\in A|| xRy \ \forall y\in A\}.$$
Theorem (from Kreps 1988): for ...
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If aggregate demand and supply do not have a specific value, what is the point of the formula?
I have been learning about aggregate supply and demand. I have just read this answer which states:
"Aggregate supply is a relationship of price level and output. It is a function, or a curve, or a ...
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58 views
Supply curve for a competitive firm with constant MC
I know that for a perfectly competitive firm, the supply curve is given by $p=MC \ge AVC$, where $AVC$ is the average variable cost.
Now I get really confused when the $MC$ comes out to be a constant....
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Perfectly competitive constant MC Questions [closed]
If I have a market in which I have constant MC, no fixed costs, and perfect competition- when would it make sense for a new firm to enter the market(granted they have the same technology)? Would I ...
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Macro economics drivers in supply chain
I am working on building a sentiment indicator for companies and investors in the supply chain. I am looking for interesting research on the macroeconomic drivers in the global supply chain (...
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Which impact would have to introduce 15 times more soy in the worldwide prices of soy?
Soy is a commoditie and the main export of Argentina. It's said Argentina has 40 millions of hectareas of arable land and it produces food for 400 million persons and that potentially could make food ...
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1answer
37 views
Predicting Shifts in Supply and Demand for Loanable Funds
I know the answer is A. but I need an explanation on why. I thought government savings would decrease since they have less tax revenue, shifting savings left and interest rates up. I could see how ...
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Getting a market supply curve from firm supply curve
PFA the image below.
As there are n firms in the market, and a tax of t moves up the cost curves of an individual firm by t units, shouldn't the cost curve of the market move up by n*t units? If yes,...
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Economics of Selling Software
My understanding:
Normally, selling a product has an increasing marginal cost per unit produced. Very often this increases more and more due to poor allocation of resources (diminishing returns). ...
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Understanding what's in the frequently reported and discussed high demand in IT specialists in Germany - is the IT Fachkräftemangel real?
So far, I can observe the following contradictory evidences what I perceive from the media.
Statement group #1. In the press, there are repeated reports from different sources about missing ...
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Does the reciprocal of the price elasticity of demand have an interpretation?
I have 2 related questions that i think are straightforward but am worried I have over-simplified!
(i) Suppose the demand curve is downward sloping and the supply curve is upwards
sloping. Suppose ...
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Supply/Demand Shift (Find New Equilibrium)
Starting: supply curve $y=x+10$ and demand curve $y = -x+30$ with equilibrium at (10, 20).
The problem states that DEMAND shifts leftwards by 3 units and to find the new equilibrium. My professor did ...
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39 views
Demand Curve Price not perfectly elastic
I'm trying to make the argument that our Sales go up when prices for all our Products are 30% off. Which I believe should be our new Regular Price. but our Demand Curve doesn't support this. Should I ...
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Supply/Demand Curve Equation (beginner) [duplicate]
The linear demand function is $Q_D = a + b(P)$.
I understand from this thread that it can be thought of as a simplification/magnification of the overall demand curve.
Is there an equation that ...
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Building an square product-to-product table based on rectangular supply and use tables
I need a product-to-product input-output (I-O) table to conduct environmentally extended I-O analysis. I have supply and use tables at basic prices relating different industries and products, but ...
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Economics Behind the Insulin Shortage?
A lot of my family is concerned about a future insulin shortage and it's reported that this shortage is growing. When I read articles from Harvard about it, they imply it's pure greed:
There are ...
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By what means do prices change?
The classical supply and demand theory states that prices and quantities of a given good (in a perfectly competitive market) are determined by the supply and demand of that good, a shift in the demand ...
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AMD and Intel duopoly
What kind of duopoly competition model do these two companies "follow"? I'm doing a work in which I aim to analyze the economic outcomes after Intel's chip shortage in november 2018.
Any links for a ...
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Origin of the saying “High prices are their own cure.”
Edwin Cannan (1915):
An old epigram says that high prices are their own cure.
Other variants of this "old epigram" include:
High prices cure themselves (1911).
High prices cure high prices ...
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Can Direct Taxes on the consumers have a impact on the Demand (rather than supply)?
I'm a 12th-grade student doing a school research paper evaluating the effectiveness of the recent increase in Additional Buyers Stamp Duty in the Singapore Housing market. This tax is directly imposed ...
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Supply elasticity on a piece-wise linear supply function
The supply elasticity at a point is the willingness to produce more or less after the price has changed (due to whatever reason?).
$$\mu_{Q,P}=\frac{\partial Q_S/Q_S}{\partial P/P}=\frac{\partial Q_S}...
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Real world examples of supply curve shapes
I get the basic intuition that at higher prices, produces would be willing to produce more, but I feel like theory can only take my understanding so far. I want to know what are the real world ...
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Which utility function yields following demand $\alpha p^{\epsilon}$ [duplicate]
I am looking for a utility function that will lead to the following demand
$$\alpha p^{\epsilon}$$.
I know it is most likely a CES utility since the elasticity of demand is constant and this is ...
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Are there more historical examples of big change in prices thanks to demand/supply changes like the tulip mania?
I'm currently searching for historical changes in prices as a result of a big/sudden change in demand/supply, like the tulip mania in Holland. Are there any notable examples?
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Positive effects of a Tunisia-EU free trade agreement?
Tunisia might be signing a free trade agreement with the EU very soon. It's called ALECA or DCFTA.
Many activists and labor unions are opposing such an agreement because it would result in losing ...
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Problem finding Demand Function
I am analyzing pricing for a new streaming service for a school project. My thought is to calculate the demand function of a player in the same industry and then calculate the optimal price. I am a ...
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Question on shifts in Supply and Demand Curves
I have a super basic question on the shift in supply and demand curves ( I haven't seen this stuff since high school). More generally, this is about solving systems of simultaneous equations.
We have ...
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If price increases and quantity remains the same can we infer that demand is perfectly inelastic?
My college tutor told me that demand for college admission at our institute is price inelastic. She says so, because, in the past 20 years, price of college education at our institute has increased, ...
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Is it right to derive social marginal benefit by adding individual prices instead of quantities?
I come across a lecture material on market functions and externalities that makes me quite confused. Here's the setup: Two stores are located next to each other. If one installs a camera system in ...
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Difference between Giffen and inferior goods. Why aren't all inferior goods Giffen goods?
What is the difference between an inferior good and a Giffen good?
Are the two following definitions for an inferior good equivalent?
Def 1: An inferior good is a good for which the demand decreases ...
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Flooding the real estate market with luxury homes: will average prices rise or fall?
If every middle class single-family detached home in a sprawling metropolitan area like Los Angeles were each replaced with two luxury condos over a short period, would average real estate prices rise ...
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What are “the fundamental categories of economics”?
I had an introductory class in marketing last week, and the professor wanted to test our previous knowledge of economics (we are juniors).
He asked us this simple question: "What are the fundamental/...
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Market demand independent of distribution of income
If preferences are identical and homogeneous, then show that market demand for any good must
be independent of the distribution of income.
My workings are as follows:
$$q^{d}(p)=\sum_{i=1}^{n}f(p_x,...
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Is there any formal definition of a relationship between resource availability and demand?
I do not have any background on economics. So my question might sound too simple and I hope it to be clear enough. I am curious about the following:
Is there any formal definition of a relationship ...
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Supply curve when the marginal cost is zero
The supply curve is built as the average marginal cost (MC), when the MC is equal or higher than the average cost (AC)
The marginal cost increases, as a result of the opposite effect of marginal ...
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Find optimal price from demand function?
I've been struggling with this for hours, trying to figure out how to solve this.
"A perfectly competitive market has the marginal cost function, c (cost is C(y)=cy) and is facing the demand function:...
