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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Does elasticity vary along the Demand/Supply curve or is it a summary statistic of a curve?

I know that the Demand curve has elastic and inelastic regions but when we say horizontal demand/supply curves are elastic or vertical curves are inelastic, in that case, does the elasticity still ...
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what can shift the inelastic demand curve?

Will the inelastic demand curve shift to the right if income increase? What can cause a shift of the inelastic demand curve?
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“Consumption lowers investment” mankiw explanation

I am teaching myself macroeconomics and I am stuck on this reading Mankiw: Because the economy’s output is fixed by the factors of production and the level of government purchases is fixed by the ...
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Need Help with Income Elasticity of Demand Problem

When​ Judy's income increased from \$400 to \$440 a​ week, she increased her demand for concert tickets by 15 percent and decreased her demand for bus rides by 20 percent. Calculate​ Judy's income ...
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$a\geq 0$, $x\succsim y$ implies $x+a\succsim y+a$ so the preference is linear?

$\succsim$ is a continuous and local non-satiate weak order. $x,y,a$ are vectors in $\mathbb R^n$ We say $a\geq0$ if all directions of the vector $a$ is greater or equal to zero. We want to prove (...
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Won’t paying wages to temporarily unemployed due to Coronavirus result in inflation?

UK government promises to pay 80% of wages for people unemployed due to coronavirus. I am not economist, so I am probably missing something, but shouldn’t paying wages to unemployed due to coronavirus ...
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What are the consequences of price-capping non-perishables undergoing temporary demand-spikes?

Due to the recent coronavirus outbreak (2020 for future readers), many consumers worldwide are overstocking on non-perishable products like toilet papers and hand sanitizers, in order to avoid ...
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Why would the price of goods rise up after increased consumption due to the outbreak?

On the wake of the COVID-19 outbreak, consumption of some goods will increase. But, my question is why so? My understanding is that, since aggregate demand for these goods has increased, supply can'...
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Few questions regarding treasury bills

I have a few questions regarding repurchase markets. My professor told our class today that Repo (Repurchase) Markets are essentally markets where the government lends corporates a very cheap rate of ...
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What if the government impose both price control and supply restriction on the market?

Due to the virus outbreak, there is a surge in demand for mask and hand sanitizes. To prevent price hiking government impose a price ceiling on the products, however consumers are behaving irrational (...
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(AD-AS model) How is it possible for firms to spend less, but supply more at higher price level, assuming no increase of the SRAS?

According to the interest rate effect theory higher prices will lead to lower GDP demanded because firms will spend less due to loans being more expensive. It seems at odds with what the SRAS curve ...
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Does fiscal policy always shift the AD more than the SRAS?

I noticed that when I read about fiscal policy and the AD-AS model, it looks implicitly assumed that when we use fiscal policy we intend to shift the AD, even when the economy experienced a negative ...
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Considering existence of firms with sticky prices of goods, why are we sure that SRAS will be upward slopping?

One of theories that explains why the SRAS is upward slopping is the theory of sticky prices. For an example, suppose there is inflation. In the short run it will take different time for firms to ...
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How will economy find long-term equilibrium in AD-AS model in case of a negative supply shock?

Let's suppose that negative supply shock happened that affected SRAS, but not LRAS. Let's also assume that previously there was long-run equilibrium at point $A$. Due to negative supply shock SRAS ...
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Why can't I find masks for the corona virus?

Not an economist by far, just a layman, and that's a layman question. How is this possible that it's difficult to find mask for the Corona Virus? I have been several times to 7/11, boots, Watson, and ...
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Why are break-even and shut down points based on average cost?

I understand the basic idea of break-even and shut-down points, where break-even is the price at which revenue covers all economic costs, and is located where the marginal cost equals to average cost. ...
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Why does supply (and demand) shift left and right as opposed to up and down?

I've wondered about this for a long time. In the past I rationalized it by saying that up and left were the same (or at least have the same overall effect), and that thinking in terms of left and ...
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Could a global supply decline lead to higher profits?

Imagine the following scenario: There is a market with some good. The demand curve stays the same over the whole scenario. Due to an unfortunate event (e.g., bad weather), the production lowers. All ...
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Calculate profit when trading between more than two goods

When trading two goods (or currencies) it is relatively easy to say if you are making profit when you know the exchange rates. For example Person A trades Bananas for Person B's Apples. Person A gives ...
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Market impact function

I have the following Dynamical system for market impact function $$p_{t+1}-p_t=a(d_t-s_t)$$ $$s_{t+1}-s_t=bp_ts_t-cs_t$$ $$d_t=y-rp_t$$ where $s_t$ is quantity supplied, $d_t$ is quantity demanded, ...
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Why are demand and supply curves shown as concave up?

Why is it that demand and supply curves are typically shown in graphs, including in Econ 101, as concave up (i.e., convex)? I know what it entails mathematically—that if $p(q_d)$ is a demand curve, $...
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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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