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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Supply elasticity of finite (non-renewable) resources

What is the elasticity of supply of a finite (non-renewable) resource that cannot be replaced (i.e. fixed stock)? Intuitively it seems like it should be inelastic, yet I can also reason elastic.
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When does the law of diminishing returns apply?

Law of diminishing returns does not always apply: The law of diminishing returns states that in all productive processes, adding more of one factor of production, while holding all others constant, ...
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Interpretation of $\frac{\partial }{\partial p_1}Q_1(p_1, p_2)/\frac{\partial}{\partial p_2} Q_1(p_1, p_2)$

I am interested in an economic interpretation for the ratio of partial derivatives of a demand function $Q_1(p_1, p_2)$, which is \begin{equation} t=\frac{\frac{\partial}{\partial p_1}Q_1(p_1, p_2)}{\...
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Are businesses and individuals buying clean / green / renewable energy contribute to slowing down the climate change?

I'm not sure if an individual choosing a "green energy supplier" is making any difference. My (potentially naive, uneducated) logic is as follows: ...
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Uniform price vs discriminatory price double auction

Uniform price and discriminatory price double auctions are the most commonly used auction mechanisms in the trading markets especially in peer to peer energy trading markets. However, I could find ...
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How to calculate clearing when supply demand curve do not intersect

I am working on a P2P energy trading project and want to implement a uniform price double auction. I have confusion about how the clearing price will be determined if the supply-demand curves do not ...
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Is the supply of a price-taking firm increasing in price?

Is the supply of a price-taking firm increasing in price? When the price goes up, this means that firms can make more profit. Therefore, they would want to increase their supply. Is there a way to ...
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Examples of textbook definitions of transaction costs, for a non-econ student

I'm not an econ major, neither am I taking it as a minor, however seemingly out of nowhere economics has jumped into my CS class when talking about the role of IT in reducing transaction costs of ...
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Cobb-Douglas demand yields a zero marginal revenue, monopolies don't exist?

From here and a pile of maths that I've done myself, $x_1 = \frac{a}{a+b}\frac{m}{p_1} \\ x_2= \frac{b}{a+b}\frac{m}{p_2}$ This yields inverse demand equations, when you have numbers stand in for $...
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When everyone sells at an event of a recession, who buys?

I'm trying to walk through and understand the basic events of the great depression. I understand that at one point (Black Thursday) the news of a downfall of stock prices hit investors, so they ...
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Question Regarding Equilibrium Price & Surplus

So here's an example of a standard Supply & Demand Relationship for an Individual Supplier: As a supplier, for 1 dollar, I'll produce 1 unit of something. For 2 dollars, I'll produce 2 units, for ...
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Individual Firm and Market Demand Curve

In Section 10.2, Monopoly Power, in Pindyck's text on Microeconomics, an example says that suppose $N$ firms produce a particular product and the market demand curve is $P = -aQ + b$. An individual ...
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“Supply creates its own demand. Only by consistently supplying it can we hope to increase the demand for the substantive over the superficial”

Keynes has disapproved the say's law "supply creates its own demand" but I want to know if there is any empirical evidence that this law doesn't hold true? Theoretically, keynes successfully ...
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elasticity of income if price changes by 10 percent

Arista always spends 10 % of her income on whatzits. Assume that her income increases by some percentage while the price of whatzits remains constant (and that all whatzits cost the same). What is ...
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Aggregating individual demand curves

I'm aggregating individual demand curves but the demand curves are inelastic or elastic. Say, 20 people have an elastic demand for a product at price of $2. Another 40 people have an elastic demand ...
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What does it mean by Global recession?

I am bit curious to understand what it actually means when I read global recession is coming soon. There are some questions which pop in my mind reading such news. Some of them are: What causes ...
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Perfectly elastic supply

How would you algebraically write a perfectly elastic supply? Will it be infinite at price = 4? (The choice of the number 4 is completely arbitrary)
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Profits and Aggregate Supply

I feel like this is quite a stupid question, but I can't wrap my head around it. Why do suppliers make less of a good as profits drop? Intuitively, shouldn't they make more of the good in order to ...
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A basic question about supply and demand graph

i have some basic knowledge on economics ,and i had an argument with a friend ,so my question is this , as we all know (If we ignore all the outside factors) that the price of any product is ...
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Is there any specific significance of inverse demand?

Why do we need separate form of demand? Where do we use inverse demand form? concept only.
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Most profitable conversion of stock into money

When Forbes-lists of top billionaires are published we are usually aghast of their riches and statements such as "the 8 richest people own as much as the poorer half" are disseminated. I was ...
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Why are prices made available to the public?

Price in micro is the point at which demand and supply meet. But in real world no one knows about the actual demand curve or supply curve. yet prices are set, so in a way there is a lot of costs being ...
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Why do some businesses choose scarcity as their business model instead of raising the price to meet the demand?

Here are some examples of what I'm talking about: Mass events such as Burning Man, the Olympics, and the World Cup sell out tickets very quickly which forces fans to resort to scalping or using bots ...
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Impact of vegetarianism on the meat industries

My main goal is to get rid of mass husbandry and the environmental impact of industrial meat production. My question is: Is it better to abandon meat from my diet completely or to endorse eco-riendly ...
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What do the excess supply and demand numbers in this chart mean?

From Econ 101, I thought markets are supposed to equilibrate so that there isn't any excess supply or excess demand. But from a WSJ story, we have the chart below. I believe it says, for example, ...
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(Microeconomics) Why must fims always lower prices when there is excess supply?

This may seem like a basic question but it has been really bothering me for a while. I understand what excess supply is, and my question is regarding the firms' response to it. All economics texbooks ...
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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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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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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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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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What impact would introducing 15 times more soy worldwide do to the price of soy?

Soy is a commodity and the main export of Argentina. It is said Argentina has 40 million of hectares of arable land and it produces food for 400 million persons and that potentially could make food ...
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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 ...