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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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 ...
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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 ...
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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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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(...
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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 ...
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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} + \...
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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-...
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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^{-\...
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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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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 ...
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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 ...
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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. ...
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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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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 ...
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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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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 ...
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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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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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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, ...
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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), ...
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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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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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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 ...
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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 ...
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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 ...
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Why offer curves of a power plant are stepwise increasing?

I was wondering why the supply curve of a power plant in the auction for the Day-Ahead Market is stepwise increasing and not a continuous function with first and second derivative strictly positive. I ...
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Are all market demands residual demands to some extent?

I’ve been thinking about how the introduction of a new product, say a new substitute, impacts market demand. Intuitively I know that it would decrease demand and increase elasticity. I am curious ...
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Why doesn't Nintendo fire up the old factories and re-produce *exact* copies of many of their most popular games, controllers and consoles?

Let's suppose that Nintendo announce tomorrow that they are going to create exact re-releases of the American and European NES, SNES and Nintendo 64 consoles, exactly the same as when they were ...
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Solving for profit function $\pi (w,p)$ given the output of production function $f(z) = \sqrt{2z_1 + 3z_2}$

Solving for profit function $\pi (w,p)$ given the output production function $f(z) = \sqrt{2z_1 + 3z_2}$. I approached this problem by trying to solve the $p\nabla f(z) = w$. This is derived from ...
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Nash in demand functions!

I am searching for some types of games that are played in linear demand functions. Altough I hear that there is a vast literatrure for games that are played in the intercept or the slope of the demand ...
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Question on estimating elasticity and cross elasticity with log-log regression model

For a regression model: Y = B0 + B1.X + B2.X2 + U, B1 and B2 is the marginal effect on ...
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Can demand side restrictions explain the productivity paradox (Solow paradox)?

Productivity paradox https://en.wikipedia.org/wiki/Productivity_paradox is the name for the slow productivity growth (i.e. slow GDP growth) of the developed economies despite the robotics, AI, ...
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What is the best way to estimate a demand curve?

I did a linear regression on quantity sold and price for a good and simply the coefficients don't make any sense. number of observations = 16 Demand=1868 -14*P Suply=0 +45*P So p*= 1421.778 and Q*= ...
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How would a global Robin Hood deed affect the economy? [closed]

In one fiction series about a dystopian world, a small group of wealthy criminals owned a large fraction of the world's cash, which was on their bank accounts in a single offshore bank. In the happy ...
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Interpreting the q-intercept of the demand curve

Given a demand curve for a particular commodity, which I'll interpret as a function $p(q)$, the $p$-intercept can be interpreted as the choke price, i.e. the lowest price at which quantity demanded is ...
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In demand and supply chart, why is it assumed that import will only happen if domestic suppliers are unable to supply?

First Review What I do understand, The demand and supply chart shows once imports are allowed... Tariff is added on imports resulting in loss of consumer surplus and increase in supplier surplus. I ...
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Confusion over shut-down point

In my textbook, the shutdown point is defined as the intersection between the average variable costs curve and the marginal costs curve. Suppose Company A has total costs function $TC(q_A)=\frac{1}{2}...
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Microeconomics undergraduate ELASTICITY help (differentiating log-linear demand curve) [closed]

How do you show that the price elasticity of demand is a constant if the demand function is log-linear? To show this, how do you differentiate the log-linear demand curve to determine dQ/dp, and ...
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Effects of Eliminating Government Controls on Supply (organ donation)

I was having a discussion with somebody about organ transplants. I gave the free market pov that allowing the sale of organs would greatly increase the supply, and the all-in price would come down ...
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Theories about how lack of supply can feed into lack of demand

Are there any economic theories supporting the possibility that lack of economic supply can result in a reduced economic demand? As an example, let's say a product exists, an electronic product let's ...
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Economics of exclusive supercars with limited number of items sold

I understand that rarity increases price, and that maximum profit may not be to sell every car you can but still the production of supercars looks weird to me. T.50 production will be 100. Allegedly ...
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Supply & Demand Modeling in Trucking/Freight

I have a dataset containing weight of freight, spend, mileage, and revenue per mile and I am trying to see if I can roughly create supply and demand curves from this data. I have multiples weight by ...
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Increase in the price of skateboard wheels cause a decrease/no change in the demand of skateboards? (2 separate markets w/ 2 separate buyers)

Would an increase in the price of skateboard wheels cause a decrease/no change in the demand of skateboards? (2 separate markets with 2 separate buyers) Note: I'm going to be mainly focused on the ...
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Why don't suppliers increase price after a positive demand shock?

Forgive me, I am new to economics. Suppose there's a demand shock in the pork market and D1 shifts to D2. Why not keep quantity supplied fixed at 220 and then raise prices to $3.70, instead of moving ...
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Why doesn't the San Francisco Bay Area have two-story houses?

The San Francisco Bay Area is an interesting place. Housing prices are through the roof (hehe) and increasing by an average of 5-20% per year for the past 20 years. This is largely driven by an ...
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Increased production costs associated with increased output produced? Why do firms have prices increase with the SRAS or Supply Curve?

In my textbook, it said (this is for SRAS and AD, but I'm also going to apply this a bit fo microeconomics.. sorry for mixing, but my question applies in both ways, I believe) "The average price ...
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Deadweight Loss and Excise Taxes

I am currently reading through the 5th Edition of Economics, by Paul Krugman and Robin Wells. Right now I am learning about excise taxes and how their different aspects (government revenue, deadweight ...
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Would Pilots and Air travel be considered complementary?

Now, my economics teacher and I have a disagreement. According to theory, as the price of air travel (airline tickets) increases, the demand for pilots will decrease as well because fewer people will ...
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Analytical approach to estimate equilibrium price for Real Estate Property

I am looking to calculate the equilibrium price, i.e an optimal price that I can set without affecting demand and maximize revenue. I've gathered historical data: occupancy rates, asking rents for ...
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What is supply-side of economics?

I've got a question for economics that I need help with, here is the question: "What is meant by the supply side of economics? Define the term ‘supply’ in the context of economics and explain the ...

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