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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Unsolveable Demand/Utility Problem?
A consume has a preference relation on $\mathbb{R}^4_+$ with a utility function defined as
$$ U(x_1,x_2,x_3)=(\ln(3x_1+2x_2+x_3))^3$$
Find the demand at prices $p=(1,1,1)$ and wage $4$.
Attempt
I ...
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1answer
51 views
Derive demand function from utility
Never encountered such a problem as I am new.
$$U(x_1,x_2)=(a\ln(x_1)+b\ln(x_2))^n$$
and $a,b,n>0$ with income $w>0$ and prices $p_1,p_2>0$.
Find the demand function.
Attempt
I am thinking ...
0
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1answer
33 views
Derive the market demand function and market supply function
In the second page of this paper Gjerstad et al derive the market demand and the supply for assets using the data shown in Table 1.
The table is
The demand function they find is $Q = 94 – 0.4 P$ and ...
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16 views
How has the Chinese freight industry developed during last year?
The last year has been filled with so many unfamiliar circumstances such as Covid-19, and now with the rising tensions as well, I'm wondering how the Chinese freight industry is developing during ...
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1answer
36 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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1answer
51 views
Classical Theory of Inflation - Money Supply, Money Demand and Prices
In every textbook, website I read when talking about the classical theory of inflation, I see the diagram below which depicts the value of money, prices etc. This one below is from Spark notes (https:...
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2answers
77 views
How does “buy low, sell high” relate to supply and demand?
I'm taking introductory microeconomics, and I'm trying to consolidate my understanding by looking at some real world examples.
In a perfectly competitive market, there are many consumers and suppliers ...
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2answers
56 views
Non monotonic supply curve
Supply curves are usually non decreasing. For example in a electricity market, providing more capacity means turning on new production units with higher costs, see e.g. the following representation:
...
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1answer
41 views
Constant marginal cost for a firm and perfect competition
What happens if the demand curve is flat because the firm is a price-taker in the market, but the firm has a constant marginal cost. If the equations are the same I assume the price would be set with ...
0
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1answer
34 views
What is the producer surplus given the price the consumer paid + price they are willing to pay, and the marginal cost of producing the product?
Linda is willing to pay $6 for a cereal box. Linda bought a cereal box for $4. The marginal cost of producing that cereal box ...
5
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1answer
71 views
Deriving aggregate output from labor demand and supply
I was reading the following paper:
http://eml.berkeley.edu//~moretti/growth.pdf
I got stuck at equation (7)
The firm's production function is $Y_{i}=A_{i}L_{i}^{\alpha}K_{i}^{\eta}T_{i}^{1-\alpha-\eta}...
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1answer
57 views
Why there is no supply on monopoly markets?
We learned in the class that monopoly markets do not have supply curve. Our textbook (Microeconomics and Behavior, page 388 from, R. Frank) says:
A monopolist has no supply curve
and it explains it ...
1
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1answer
30 views
How did the Price/Value of any goods measure in money determined in the first place
Nowadays most value/price of goods and services are determined by the supply and demand in the market. And most of the time we use money which back by the credit/trust of the country to exchange these ...
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0answers
30 views
Market shares of Nested Logit demand model
Consider a Nested Logit demand model with two nests, $N_1, N_2$: $N_1$ contains the outside option only (labelled "0"), $N_2$ contains all the remaining alternatives (labelled "$j=1,...,...
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Simple supply and demand problem
I'm not sure about this, can I ask you if I'm wrong? Thanks.
Data:
$$Q_{s}=P/2$$
$$Q_{d}=P-42$$
Questions:
a) How many units will be traded at 35 dollars? At $14 dollars?
b) What quantity at what ...
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0answers
15 views
Problem with the discrete demand curve
I am starting to learn microeconomics from a book named Intermediate Microeconomics by Hal R. Varian. The first chapter is on market. I was attempting to solve the end text problems but was stuck. ...
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1answer
39 views
Marginal Utility Meaning [closed]
I'm revisiting some old topics from introductory economics and I am not quite sure I have convinced myself of the theory behind marginal utility. I have a few simple questions if anyone could please ...
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2answers
337 views
Understanding Vernon Smith's 1962 “An Experimental Study of Competitive Market Behavior”
Vernon Smith's 1962 paper "An Experimental Study of Competitive Market Behavior" simulates a market using students (who have piece of paper giving their reservation prices). In one of the ...
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1answer
31 views
Demand and Supply Curve Shifts
I Study economics independently at Marginal Revolution University.
But I am stuck with few of the very first Concepts. Those are:
Demand and Supply curve Shifts in Isolation.
Demand Curve Shifts:
When ...
0
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0answers
30 views
Is there a mathematical relationship between availability of land and real estate prices?
I’ve seen politicians, activists, think tanks etc proposing a (kind of) land value/property tax for ending speculative land hoarding. They say that builders hoard land and create artificial scarcity ...
3
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2answers
269 views
First order condition of log functions in general and interpretation
In the following, a first order condition for a log function is calculated.
I know how the left part was calculated, however, I am a little bit confused where the gamma on the right site comes from ...
2
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1answer
101 views
Graphics card shortage - why don't they just raise prices?
See e.g.
Nvidia CEO: GeForce RTX 3080 and 3090 Shortages To Last Until 2021 (Tom's Hardware, 2020-10-05)
The great graphics card shortage of 2020 (and 2021) (BBC, 2021-01-24)
Why don't Nvidia and ...
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0answers
15 views
Name of scheme where two entities collude
Consider the following scheme that I remember from the sitcom Zach and Cody:
One person is selling very spicy food in a hotel lobby, and another person is selling glasses of milk at exorbitant prices ...
0
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1answer
27 views
LM-Curve formula question
An LM Curve can be described as following
$M^d(Y,i) = M_0 + M_1Y – M_2i$
$M^d = M/P$
M and P are exogen
I know that $i$ is interest rate, and Y is GDP.
Why is $M_1$ and $M_2$ positive? And what does $...
0
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1answer
22 views
Derive IS-Curve (Y)
An Economy has a GDP described by the following:
$Z=C(Y −T)+G+I(r)$
$C(Y −T)=C_0 +C_1(Y −T)$
$I(r) = I_0 − I_1r$
where Z is planned expenditure, Y is GDP, T is tax, G is public consumption, I is ...
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1answer
53 views
Practical advice for calculating optimal prices
The company I work for is interested in making the pricing for its products more quantitative. I researched the topic and I found some theory for calculating optimal pricing in Microeconomics texts ...
0
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0answers
12 views
How to distinguish if production costs changes the elasticity of the supply or shifts it?
I have specific doubts about how a factor affects supply elasticity and how it shifts the supply curve. In many cases, the literature shows that some factors affect supply in both ways. For example, a ...
0
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0answers
30 views
Interpretation of market condition given by relation between elasticities
The total market demand is given by the sum of the two destinations ($e$ and $f$) given to the product.
Given these conditions:
Demand: $d(p) = e(p) + f(p)$ where:
$d(p) > 0$, $d'(p) \leq 0$;
$e(...
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0answers
31 views
graph of dependent income
I would need help with the following problem about consumer theory. Let us say that $X$ is the amount of days at the sea and $Y$ is the amount of days on the cottage. We have some utility function $u(...
0
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2answers
180 views
Why is the supply curve in the foreign-currency exchange market vertical?
In the book 'Economics' by Mankiw and Taylor the demand and supply curves on the foreign-currency exchange market are shown as follows:
The supply equals the Net Capital Outflow (NCO). I would have ...
1
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1answer
49 views
LM curve from money demand
Let $M^d (Y,r)=a+bY-cr$ where $M^d = M/P$ is the money demand in the economy. $a,b,c>0$. Derive $LM$.
My try
$M/P=a + b Y - c r$
$b Y = -a + \frac{M}{P} + c r$
$Y = -\frac{a}{b} + \frac{M}{b P} + \...
0
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2answers
229 views
When do the curves touch the axes and when don't they?
The Demand Curve
The Supply Curve
Monopoly: How to Graph It
In videos (1) and (2), we see that the supply and demand curves do not touch the axes.
In (3), we see that the demand curve touches the Y-...
5
votes
1answer
161 views
Derivation of Surplus in Paul Romer's paper on “mathiness”
In this paper by P. Romer https://pubs.aeaweb.org/doi/pdfplus/10.1257/aer.p20151066
I'm wondering the Surplus $S$ was derived.
By using the given condition I found that $$q_0=m^{-\tfrac{1}{a+b}}N^{-\...
2
votes
1answer
176 views
Elasticity of demand
I'm reading a paper from Pindyck (1988) where $$P_t=X_t-\gamma Q_t.$$ $P_t$ is the price, $X_t$ is the demand state variable, $Q_t$ production and $\gamma\geq0$ is apparently the ''(constant) demand ...
0
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0answers
18 views
Are economic profits above normal for many firms in a perfectly-competitive increasing-cost industry?
In a perfectly-competitive constant-cost industry, all firms will have normal profits in the long run. This fact is very clear to me as the long run supply curve is perfectly elastic and hence each ...
2
votes
1answer
431 views
Calculating Consumer Surplus Given Table
Can someone help me? The answer is supposed to be 36 but I have no idea how they got that answer. Can someone explain why consumer surplus is 36 in this instance? Thanks!
Refer to Table below. If the ...
0
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0answers
9 views
Algorithms/Models to solve minimal Matchings for consumer producer household pairs
I’m working on the following problem:
Minimising the electricity price for household trading pairs. There’s producer and consumer households. Trades are just possible between producers and consumers.
...
0
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1answer
842 views
Calculate supply function based on production or cost function
Q1: A company has the following production function:
$$f(x_1,x_2) = 2x_1 + x_2$$.
The factor prices are $w_1=4$ and $w_2=3$. Calculate the company's supply function.
Q2: A company's cost function is
$$...
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3answers
5k views
Why do wages not equalize across space?
In standard economic theory wages are simply prices on the labor market determined in equilibrium by the supply and demand of labor. Looking across space within countries it is however standard to ...
1
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2answers
129 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 ...
4
votes
0answers
54 views
Why does short run market supply become more elastic with more firms
I have heard a justification along the lines of this: The supply curve becomes flatter (more elastic) with more firms in the market, because a given increase in price calls forth more production when ...
3
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2answers
432 views
Integral solution (or a simpler) to consumer surplus - What is wrong?
Problem
Given demand $D(p)=A-ap$, and $A,a>0$ and a fixed price $0<p_1<A/a$ by some company.
Calculate the consumer surplus and its derivative with respect to $p$. What is this number?
My ...
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4answers
174 views
Who is losing in an arbitrage?
When some entity takes advantage of an arbitrage opportunity, who is losing money? For example, when there are price differences across cryptocurrency exchanges and someone exploits an arbitrage ...
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2answers
174 views
which type of goods maximum utility function represent?
I am not sure, which type of goods does the maximum utility function represent i.e., $U(X_1, X_2) =\max(X_1, X_2)$.
As the $U(X_1, X_2) =\min(X_1, X_2)$ represent the complementary goods, and $U(X_1, ...
1
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1answer
40 views
Find equilibrium price using excess demand function
Consider an economy with two agents. There are two goods, x and y. Agents' preferences are Leontif ones as follows:
$u_1(x,y)=\min(x,4y)$ and $u_2(x,y)=\min(x,y)$.
Initial endowment for 1 is (2,4), ...
1
vote
1answer
46 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 ...
0
votes
1answer
28 views
Can individual consumers ever be price-makers, and can they thereby have major effects on welfare?
Suppose there's a big demand shock on some good X. As long as X has fairly standard supply and demand curves, that'll raise the price. And all of the buyers who would have bought at the lower price ...
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2answers
44 views
Question about the Law of Supply
I have a contention with the Law of Supply's dictum "if the price of a good falls, then the quantity supplied of that good falls, ceteris paribus."
Imagine a market for widgets produced by ...
2
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2answers
25 views
Current House Demand and Supply
Home prices are at an all time high so according to supply and demand, that means suppliers will supply more homes due to the high prices. Demand for a house on the other hand is also at an all time ...
2
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3answers
74 views
Does it ever make sense to underproduce as a firm?
The larger the supply, the lower the price. Therefore, the more thneeds you (the firm) produce, the less you'll be able to sell each one for. Traditional sense says that as long as there are people ...
