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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How price is determined in the following monopoly model question?

I am studying microeconomics, and got stuck on the following question, specifically, part (b) and part (c): A monopoly-owned retail store is located next to a monopoly-owned parking lot. (The store ...
Grand Minister's user avatar
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Why is the supply curve monotonically increasing?

Context I am a beginner in microeconomics. I am trying to understand the demand-supply model. In my previous question (Supply curve of what?) I understood that supply curves exist for each product. ...
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Supply curve of what?

I am a beginner in microeconomics. I do not understand the supply curve at all. Supply curve of what? Is there a supply curve for each product? For example, is there the supply curve of "iPhone ...
Dinosaur's user avatar
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Toy model equilibrium calculation: How a small system's firm determines wage and price?

I am trying to model a small system, with limited population and a single firm. Personally I have no economic background but only taken a simple microeconomics course and I am quite interested in ...
DongAlpha's user avatar
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Why don't prices for hotel rooms rise to fully match demand?

Hotel rooms routinely book up months in advance of anticipated high demand. Why don't they raise their prices so that the last few rooms sell shortly before they're occupied? Even if they can't ...
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Is an "arms race" between wages and inflation inevitable?

If an employer were to ensure wages kept parity with or outpaced inflation, there's an argument that this would cause runaway inflation. That is, employees would have more capital to play with, so the ...
Xophmeister's user avatar
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questions about basic supply and demand curve theory

I've been getting into mathematics for its own sake and finding the same type of math can be applied across various fields and diverse domains (physics, engineering, data science, ecology, economics, ...
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in demand curve tax on buyer shouldnt it be movement along the graph?

if buyer has the burden of tax it shift the demand curve but tax comes under(according to me) in Price of the good so shouldnt it be movement along the graph this is the reasoning in my reading for ...
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why is increasing price not more profitable when the demand is unitary elastic?

according to the theory (if p-p1=q-q1), the total revenue remains the same because the demand decreases by the same percentage price does. If this is the elasticity of a product, the company ...
wjkrkdfjkn's user avatar
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Is the supply and demand elasticity equal at the equilibrium?

I am working through homeowrk problems and we were asked to calculate the supply and demand at the equilibruim using either the point or arc method. I chose to use the point method and will provide a ...
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If the government subsidizes electric vehicle (EV) purchases , then we can predict a higher price for non-EV vehicles?

Hello this question came across on my homework. Here's what I know so far. I know the answer is false, but given we need to produce two graphs I am confused on how to represent my knowledge in two ...
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When talking about the supply curve, does a price increase always result in an increase in quantity sold?

I thought I had an understanding of the law of supply (i.e that when price increases supply should also increase) but we were asked a question on a recent homework sheet that kind of puzzled me. the ...
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two real gdp at the same price level in ad as model

in a macro book of arnold i see an agg demand-supply model where it seems above the equilibrium price level there are two real gdp for the same price level. the book then goes on to explain that there ...
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does the income-output-expenditure method of getting real gdp hold in ad as model

in the ad as model, it seems there's two different real gdp for a given price level when in disequilibrium. does this mean the real gdp counted from the demand side is not equal to the real gdp ...
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Inequality and effect on pricing

Suppose there’s an island that for whatever reason has a finite amount of US Dollars; 1000 residents live on the island and use this fixed amount of currency to exchange goods and services. Suddenly, ...
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How does artificial scarcity benefit the seller?

It is said that a diamond selling company (you know the one ;) ) deliberately buys up stocks of diamonds and refuses to sell them in order to generate an "artificial scarcity", so as to ...
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Convexity preferences

What is the difference between convexity and strict convexity preferences? What is the difference between quasi-concavity and quasi-convexity? And is MRS still true in concave preferences?
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Why doesn't it matter, whether you draw Demand and Supply Curves as arcs, or straight lines?

I read this in an undergraduate economics textbook, but I cannot remember which. Can anyone cite the author, title, and page? I am paraphrasing, but it counseled that it doesn't matter, whether you ...
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effect of tax imposition on consumer and supplier with a price ceiling

Use a supply and demand diagram, suppose there's a valid price ceiling, say at 2. Now we add a specific tax of 1, to suppliers, what is the new consumer surplus, producer surplus, and tax revenue? ...
Nonenicht's user avatar
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tax imposition on supply and demand curve

I've just started learning Economics a few days ago. There's a question here that I can't understand. If a tax is imposed on consumers, the demand curve should shift to the left, and a new market ...
Nonenicht's user avatar
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How do free goods change the equilibrium price?

In a single good market, what happens to the equilibrium price if a supplier decides to give out some of their goods for free? (assuming total production remains the same) My reasoning: Either the ...
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About the basics in marginal benefit

I am a beginner in economics and I have some concerns in demand and supply. Marginal benefit is the additional benefit that a consumer gain from an extra unit of a good. When marginal benefit is equal ...
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Distance between two allocations and the Shapley-Folkman lemma

I have two allocations $\omega_1, \omega_2$ with the following values for the decision variables: $\omega_1$: demand side: $x_1 = 1$; supply side: $y_1 = 5, y_2 = 3$ $\omega_2$: demand side: $x_1 = 1$...
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Price elasticity of demand coefficient

I am working on the following question: AS price increases along a straight line demand curve, will the price elasticity of demand coefficient increase, decrease or remain unchanged? The answer states ...
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What should a producer do in this scenario?

Let’s say a producer supplies 100 units of some good but consumers will only demand 100 units if the price is zero. For every dollar the producer charges per unit, 1 consumer is lost. So if he priced ...
Anthony Fallone's user avatar
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Why don't producers of goods with inelastic demand refuse to increase supply?

I'm reading Paul Samuelson's Economics (19th edition, 2009). In page 71, the Paradox of the Bumper Harvest is introduced. According to the paradox, an increase in food supply from a good harvest ...
Guilherme Ferrão's user avatar
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How does perfect competition work?

I have made several other posts about this topic, but all the answers I got confused me even more. This is my attempt at making a comprehensive post that highlights my confusion about perfect ...
Anthony Fallone's user avatar
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Why can't an individual producer influence market price in perfect competition?

I’ve been told that under perfect competition, an individual producer is a price-taker and has no influence on the market equilibrium price. But this doesn’t make sense to me since the market ...
Anthony Fallone's user avatar
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How do I correctly incorporate a $3 tax on supply to each unit sold?

I am wondering how to properly add a $3 tax on supply to each unit sold. I have done a welfare analysis pre tax to the following equations: Demand: $Q = 400-2P$ Supply: $Q = 3P + 50$ When adding the ...
Andrew Igdal's user avatar
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Is John Maynard Keynes an economic liberal or an economic nationalist?

I am working on a research project about political economy. However, I stumbled upon differences in the interpretation of the orientation of John Maynard Keynes. Some sources indicate that Keynes is a ...
Nikolay Bogdanov's user avatar
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How to find the equilibrium amount of $p_{2}$ in terms of $p_{1}$?

There are $100$ tons of crops remaining to supply for the two months. The crop holders consider whether to sell crops now or one month later. Holders face the demand curve of each period as below: $...
Ernst Chen's user avatar
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Why would lowering quantity supplied cause to quantity demanded to increase?

I am reading an article about price-takers versus price-makers and it says the following: A Price Maker has the ability to alter the output of its product at any time to suit its needs for profit ...
Anthony Fallone's user avatar
2 votes
1 answer
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Should firecrackers which disturb neighbours be a production externality or consumption externality?

I am given a question to plot supply-demand for firecrackers. Bursting firecrackers produce noise so we have plot the externality in the graph. In the answer key, it is given that due to the noise, ...
MangoPizza's user avatar
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2 answers
187 views

Different methods to calculate price elasticity

I was testing different methods to calculate price elasticities in simple theoretical scenarios and I encountered a seemingly discrepancy between two very popular methodologies. Methodology 1: use the ...
neutrino's user avatar
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When per unit indirect tax is imposed on a good does the supply curve shift left or does it shift upwards?

My economics textbook says it shifts upwards but my school notes tell me it shifts leftwards. So which one is true? Or are they both true?
Hardik Patil's user avatar
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Modelling the inefficiency of redistribution in case of proportional taxation and lump-sum subsidy

I would like to model the following situation in the simplest possible way. First, a government imposes a proportional tax on the whole population, say, x% of income for each household. But then, it ...
Alekz112's user avatar
2 votes
1 answer
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Solve long run production function of a firm using technical rate of substitution

I don't understand the solution to a question which deals with the long run production function of a firm. The question is: Suppose a firm has a production function $f(x_1, x_1) = x_1^{0.5}x_2^{0.5}$, ...
juliusphysics's user avatar
1 vote
1 answer
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Finding the profit from a demand equation

The demand equation for a company's product is $3p + x = 400$, where $x(t)$ units can be sold at a price of $p$ each. If the demand increases at a rate of 3 units per year when the demand reaches 50 ...
eraldcoil's user avatar
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Suppliers holding back production in expectation of better price in future

Anthony’s Ephemera Emporium sells signed photos of cryptids like Bigfoot, chupacabra, and other mythical creatures. These photos are substitutes in production. If Anthony expects the price of signed ...
MangoPizza's user avatar
4 votes
2 answers
345 views

Why is the supply function the first derivative of the profit function in the long run?

We have the profit function of the firm profit = $p^2 -2p -399$. We take derivative of it we say that the output supply function is =$2p-2$ I understand that Profit = q*p - TC But why do we say the ...
aliosha karamazov's user avatar
1 vote
1 answer
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Supply function of a price-taking firm with a quadratic production function

For a firm with the production function $$Q = 40L-L^2$$ where $L$ is labor and wage $w = 20$ find supply function of a price-taking firm under perfect competition. Fixed costs equal $10$. Following ...
honkhonk's user avatar
2 votes
3 answers
256 views

How to determine elasticity of demand when equation has more than one variable

How should one go about determining the own price elasticity of demand of the following: Assume that the market demand for barley is given by: Q=1,900−4PB+0.1M+2PW , where Q is the quantity of barley ...
John M Keynes's user avatar
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1 answer
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Is this intuition correction? [duplicate]

For simplicity sake, let’s assume I am the only supplier in a market and have the same goal of making profit as other firms do. Let’s say I produce 300 units of some good. I look at the demand ...
Anthony Fallone's user avatar
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Examples of instrumental variables for business problems (not rainfall!)

I have been learning about IV as a non-economist and I think I understand the examples I've seen which used rainfall as an IV for modeling the sales of crops or fish at an outdoor market. However, for ...
Arthur's user avatar
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Question about marginal utility and the diamond/water paradox

So, according to economists, marginal utility explains why the price of diamonds are higher than the price of water. But I don’t know why that’s necessarily the case. Yes, it’s true that the marginal ...
Anthony Fallone's user avatar
2 votes
1 answer
141 views

Is there a situation when a shift in supply and demand leads to a shortage?

For my intro health economics class, my professor asked us to explain how certain scenarios impact the supply and demand of health care (using only supply/demand analysis). He raised an example of a ...
user43370's user avatar
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Is there a reason why a producer wouldn’t start selling at a high price and then keep lowering until they’ve sold everything?

I know ideally a producer is supposed to sell the equilibrium quantity for the equilibrium price. But is there a reason why a producer wouldn’t produce a quantity higher than the equilibrium quantity ...
Anthony Fallone's user avatar
-2 votes
1 answer
65 views

Does demand decrease when supply increases? [closed]

I’ve been reading about supply and demand and I don’t know if I’m misinterpreting, but it seems like what they’re saying is that when the quantity supplied of something increases, the quantity ...
Anthony Fallone's user avatar
0 votes
1 answer
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What economic theories describe the phenomenon of zero marginal utility when a resources is given at zero cost?

(I am not looking for the law of diminishing marginal utility, even though it is related) Which economic theory or theories describe the following problem? When a resource is made available at 0 ...
Brian Bien's user avatar
2 votes
2 answers
71 views

Question about equilibrium price and surplus/excess supply

My question is regarding the image below: It says “given a surplus, the price will fall quickly toward the equilibrium level of 6 dollars” but there will still be a quantity left over if the price ...
Anthony Fallone's user avatar

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