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 supply go down if people boycott your goods?

I'm doing an introductory class on economics and I'm leaning about supply and demand. There's one exercise I'm stuck on: Let's say we're country A and we sell bananas to country B. If country B ...
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How much of Australian inflation is demand driven or supply driven?

For the Aussies who have been keeping track with the current inflation rate at 5.1% we have seen the policy response by the RBA increasing the cash rate by 25 basis points so its now at 0.35%. This is ...
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Is there a formula for increasing the price whenever scarcity increases?

If this is not the right place to ask this, I'd appreciate it if you could direct me to the right one, if there is one. I have a fixed set of items for sale These items are unique, i.e. they are not ...
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Road pricing to fix congestion on roads

Would someone be able to explain this graph? When the flow of traffic is higher at F1, why is the cost per trip lower (at b) compared to F2 where the cost per trip is higher (at c)? Lower congestion ...
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compute amount to purchase for inventory

I have the sale forecasting of a product as follows (next 12 months). To produce one product, it needs 1 item A, 1 item B, 1 item C, and 12 items D. The current situation of my inventory is as ...
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How should we understand the surplus triangle in the context of a price floor?

In the context of the standard supply and demand diagram, is there any economic interpretation of a triangle showing the surplus/excess supply that results from a price floor set above the market ...
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Which of the following is most likely to cause a currency to depreciate while discouraging capital formation?

Text in Image: Which of the following is most likely to cause a currency to depreciate while discouraging capital formation? (A) A decrease in the demand for money (B) An increase in the supply for ...
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1 vote
1 answer
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Why is this equilibrium price unique? (Varian exercise)

My questions refer to the first exercise in chapter one of Varian - Intermediate Microeconomics (9th edition). The exercise deals with an apartment rental market, an example explored in the first ...
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Why don't both Supply and Demand Curve Shift in Loanable Funds Market in Case of Gov't Deficit/Surplus?

Here it is written: But that doesn’t mean both curves shift? Supply and demand do not have the same determinants in any market. Your graphical model should reflect only one point of view. I don't ...
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Why doesn't demand affect output in the long run?

In Mankiw's Macroeconomics, he states that, in the short run, an economy's output depends both on its supply and demand for goods and services, because of price stickiness. In the long run, when ...
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Why is the horizontal axis 'Real GDP' in Aggregate Demand Curve

In the aggregate demand curve, the horizontal axis is labelled 'Real GDP'. Why doesn't it represent 'Quantity Demanded'? After all the curve is the aggregate demand curve, so we have to show some ...
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A new study finds that eating apples improves health. Will this shift the supply curve?

Suppose that a new study finds that eating apples helps improve health. Will this change supply curve? I think yes. Increase in demand of apples causes more apple producers to spring up. This will ...
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Fuel prices spot vs forward

The commodities market is , for the most part, a forward one. How come then prices of gasoline in gaz stations jump almost overnight whenever a geopolitical tension arises?
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How do I illustrate (with a diagram) an increase in supply after a decrease in supply due to excise tax (while the excise tax is still in place)?

If a good currently has supply curve S1, then the govt. imposes an excise tax on it, this causes the supply to decrease and shift to the left, becoming S2. But what happens if the supply suddenly ...
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21 votes
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Why would a company sabotage its product's ability to be used for a particular purpose?

I saw in the news recently that NVIDIA has placed limits on the hash rate for mining Ethereum cryptocurrency. This is purportedly to get more GPUs into the hands of gamers instead of crypto miners. ...
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Explaining Textbook and College Footballs Prices for Students using Elasticity

I am answering the following practice question in my Microeconomics course, and would love some feedback/check if my answers are correct: Using concepts of elasticity, explain the following situations:...
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2 answers
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Supply affects demand, but not through the prices

Microeconomic theory describes supply and demand in a free market as two functions that are related only through the price: the produces decide how much to supply given the price, and the consumers ...
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Pricing mistakes in user-to-user marketplaces

Consider a user-to-user marketplace, where sellers sell a good at a price that they decide and buyers choose which product to buy. When a seller decides the price for a product, the seller should try ...
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Is a market price unique?

The market price is defined as the most recent value at which a commodity is traded. But for some commodities, the price might vary significantly between sellers. For example, there my local fruit ...
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4 answers
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Is the market price objective?

Is the market price objective, does it exist independently of human consciousness, how do we treat the market price in economics and the philosophy of economics? The market price is the current price ...
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6 votes
2 answers
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Does the Sonnenschein-Mantel-Debreu theorem fundamentally undermine Mises' Economic Calculation Argument?

So recently I have been thinking a lot about this fundamental question: Does the Sonnenschein-Mantel-Debreu theorem disprove the "Law of Demand"? Basically, the Sonnenschein-Mantel-Debreu ...
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Does countries building gas plants result in rising gas prices?

Looking at the following chart we can see that while volatile, the gas price is reaching new record heights. Now I want to refer to some articles: Germany has to decide on gas-to-power plants quickly ...
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Is it any more harmful for the government to mandate a wage increase?

Generally speaking, is it any more advantageous/disadvantageous for the government to mandate a wage increase than for companies to increase wages based on the supply of labor?
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5 votes
3 answers
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Why land supply is inelastic?

I am reading about Georgism, and I am puzzled by the notion that the land supply is inelastic. I posted a question in the reddit of georgism, but that left me more confused than before. It seems that ...
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How is value determined?

If I create a new currency (perhaps a cryptocurrency) and I wanted it to be the only currency usable to purchase an item/service, how would I determine the price of that service? I would think that it ...
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Comparison of Inflation rate of particular product with world inflation rate

To check the price reasonableness of the purchased product by Procurement manager, I aim to compare the monthly inflation rate of purchased product with world inflation rate of that product and ...
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-1 votes
1 answer
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Do Covid vaccine prices prove that the microeconomic supply curve is wrong?

According to Microeconomics, essential commodities should have an inelastic supply curve -- prices for vaccines should have risen in late 2020 and during the Delta variant surge. But the actual ...
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1 vote
1 answer
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Slope of linear demand curve and price elasticity regions along the curve

My textbook mentions that the slope of a linear demand curve gives crucial information regarding price elasticity of demand; namely, that demand is inelastic for steeper curves and elastic for flatter ...
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1 answer
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Is there a term to refer to the point at which an actor updates a "price"?

Examples of what I mean: A company increases the price of their product to match increasing COGS (e.g. a restaurant increasing their prices because the cost of ingredients has increased significantly)...
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Can the Law of supply and demand be derived from the Subjective Theory of Value using Agent-based modeling? [closed]

I was tinking about the Law of Supply and Demand and Subjective Theory of Value and I have the intuition that the first can be derived from the second using agent-based modeling. Is this true? Also I ...
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2 votes
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Why are the gas prices so high in the US and why does it depend on OPEC+?

I've been reading these days a lot of discussions between people on the internet concerning the hikes in gas prices. I then read many articles about this, and the opinions are really different, and ...
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Price Response Function vs Willingness to Pay vs Price Response Function

I'm confused on three different economics terms and seek clarification. The terms are "Demand Curve, "Price Response Function", and "Willingness to Pay". I had thought that ...
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5 votes
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What is the economic interpretation of $ \partial q / \partial p = - (1/p^2) w^T (D_w x) w $ in profit maximization?

Consider a profit maximizing firm that is perfectly competitive in both input and output markets. It takes $n$ inputs $ x \in \mathbb{R}^n_+ $ and produces $f(x)$ units of output, where $ f: \mathbb{R}...
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2 votes
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Show that the long-run supply curve of an increasing cost industry in perfect competition is upward sloping

Many intermediate microeconomics textbooks teach us that in perfect competition, the long-run supply curve of an increasing cost industry is upward-sloping. However, They usually give some hand-waving ...
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1 vote
1 answer
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Why is Deadweight Loss Bad for Society?

I have learned that in a perfectly competitive market in the absence of externalities, taxes will impose a deadweight loss upon society, due to reduced market participation by consumers and producers. ...
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Deriving the inverse demand curve

I have been given the following information about a product and I am trying to find the inverse demand curve (with the assumption that the demand curve is linear). Annual sales: \$2 million Price per ...
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Can an increase in demand indirectly lead to a decrease in average price due to economies of scale?

Let's say firm A produces a very niche product, that requires them to handcraft each product, and because of extremely expensive and skilled labor the production costs are extremely high. Firm A has a ...
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Are there any economic reasons why luxury goods should not be auctioned off, or at least dynamically priced, when facing shortages?

Over the last year many prominent examples come to mind, where there does not seem to be any limiting moral or ethical reasons, and are simply not available most of the time due to demand greatly ...
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Why do the BEA's Use and Supply Tables have Industries (and not products) on the Rows?

I'm learning about Use and Supply tables, and all the tutorials (including this very nice video from the Singapore Department of Statistics) show that products are on the rows and industries are on ...
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2 answers
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Why could a CO2 producer in the UK not just increase its price to match input price increases?

I'm confused about this UK story of the need for government intervention to "bail out" a CO2 producer: The UK government has agreed to subsidize a major US fertilizer manufacturer at a cost ...
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Is There Literature on Individual Demand Cap (in Housing Market)?

Some (obv. very left) politicians in germany propose to impose that owning housing should be capped at what a person does use him/herself. That is, you should not be allowed to own housing for ...
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Does the supply curve always slope up?

I was working through a thought experiment which appears to violate the Law of Supply (i.e., that supply curves are non-decreasing). Suppose that a worker is paid by the hour and, given his hourly ...
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2 votes
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What were the historical theories of price formation before demand-supply relationship was well understood?

Markets have existed for thousands of years. People must had ideas about where prices came from. Before the clear formulation of demand/supply-based theory of prices, what were the historical theories ...
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Why supply is more elastic at lower prices and more inelastic at higher prices?

In my economics book*, in the lesson explaining what price elasticity of supply is, it's written: In reality, supply curves are likely to be non-linear, so will have a different PES value at ...
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Why do supply curves that start at the origin have a PES value of 1?

In my economics book*, in the lesson explaining what price elasticity of supply is, it's written: Any supply curve that starts at the origin has a PES value equal to 1. The theoretical outcome means ...
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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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1 answer
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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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3 answers
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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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0 votes
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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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