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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Why does quantity supply increase with price in economics? [duplicate]

I have been trying to wrap my head around the law of supply for sometime now, but I keep stumbling because of this: Lets take the example of oil, suppose oil's price yesterday was Rs.100, and now it ...
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Demand as a function of supply and storage

I'm trying to model a situation where demand is a function of the supply of medical equipments. The equipment costs are already covered, hence price is not taken into consideration. The supply however ...
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How to show consumer subsidy (rebate) on supply and demand diagram?

I am currently working on an assignment and needed some help. My assignment requires me to find an article relating to a form of government intervention such as taxes or subsidies and analyse the ...
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What causes inflation?

Given the recent increases in the price of many things in the US (lumber, used cars, gasoline, etc…) I have begun thinking about what is going on at a macroeconomic level. My first thought is “it’s ...
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What determines the price of a stock other than supply and demand?

It is said that supply and demand determine the price of stocks but there must be other factors. For example when a company is about to expand the price will usually go up. Why? (The answer that it is ...
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Why do firms reduce both price and supply during a recession?

Could anyone explain why firms reduce both price and supply of goods and services during a recession with a practical real life example for better understanding ?
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If companies could reduce prices to bring up demand during a recession, then why there is less production/output and more unemployment

When consumer demand reduces, and if companies could reduce prices to bring up demand during a recession, then why there is less production/output and more unemployment during a recession?
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Fall in price of sugar affects price and quantity of candy [closed]

Using the supply and demand model, explain and illustrate how the price and quantity of candy would be affected by sugar prices dropping, starting from the equilibrium point. Am I right in stating ...
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Effect of import quota on NCO, NX

I'm studying loanable funds from the book "Brief Principles of Macroeconomics, 6th ed". On page 307, the effects of an import quota are explained below. It said the net export rises, but NCO ...
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I think hot weather alters firms' desire to sell at some given price because hot weather increases the demand for ice cream. (Mankiw's book)

I am reading "Principles of Economics" by N. Gregory Mankiw. I think hot weather alters firms' desire to sell at some given price because hot weather increases the demand for ice cream. Am I ...
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Why doesn't the supply curve shift to the left in the following situation? Why do producers respond to the surplus by cutting their prices?

I am reading "Principles of Economics" by N. Gregory Mankiw. Why doesn't the supply curve shift to the left in the following situation? Why do producers respond to the surplus by cutting ...
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Demand for minimum of $4$ different goods

The consumer has the utility function with $4$ goods $$U=\min\left \{ \sqrt{x+y},z+w \right \}$$ The prices are $p=(3,2,2,1)$ with wage $m=1$. Find the demand. So far I have observed that it is ...
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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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Derive demand function from utility [closed]

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 ...
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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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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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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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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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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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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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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 ...
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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 ...
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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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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 ...
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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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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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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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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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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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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 ...
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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 ...
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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 ...
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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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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 ...
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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 $...
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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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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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