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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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?
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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 ...
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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 ...
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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 ...
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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 ...
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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 ...
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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 ...
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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 ...
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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:
$...
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Why would lowering quantity supplied cause to quantity demanded to increase?
I am reading an article about price-takers vs. price-makers, and it says the following:
A Price Maker can alter the output of its product at any time to suit its needs for profit maximization. For ...
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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, ...
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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 ...
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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?
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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 ...
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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 $f(x_1, x_1) = x_1^{0.5}x_2^{0.5}$, ...
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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 ...
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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 ...
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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 ...
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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 ...
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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 ...
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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 ...
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Why does SoCalGas use a commodity price that is currently 10X the market?
SoCalGas charges separately for transportation, taxes, and commodity. In January 2023, SoCalGas's commodity portion was \$3.45 per therm, or $34.50 per million BTU. But the US wholesale price in that ...
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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 ...
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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 ...
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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 ...
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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 ...
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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 ...
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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 ...
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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 ...
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Relationship between supply & demand and marginal cost & marginal revenue under perfect competition
Under perfect competition, $MR=MC=P$, but $P$ is also the point where the supply and demand curves intersect. Why is it that those will always correspond to the same point?
Or is the idea just that if ...
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How to simulate supply and demand in a virtual environment
First, I'm not absolutely certain if this site is the correct one for this question as it covers multiple topics simultaneously.
Second, Some context to my question, I'm working on an in-game economy ...
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Does consumer demand in the secondhand market actually affect the firsthand market for high-cost goods
In the 21st Century, there is an increasing consumer awareness of the externalities of manufacturing and along with it a stronger consumer preference to buying used goods rather than new.
My question ...
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Scale-Dependent Demand Curve
Setup: Say I have a store and I have 50 bottles that I want to sell. Outside this store there are 100 people who want water bottles and each differs in the price they are willing to pay for a water ...
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Water more expensive in the desert. Why?
Let be two cities with the same population, one in the desert and the other one not in the desert. Both are going to need water infrastructure to supply water to the inhabitants. The cost to build ...
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Q question on the components of the $M_1$ component of money supply
The $M_1$ component of the money supply is given by the sum of the value of money held by the public+the demand deposits in the country + other deposits(money of other government institutions held by ...
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regulation using taxes
Hello, I do not understand why option D is the correct answer, shouldn't the price paid by the consumers increase by the amount of the tax?
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How can an individual firm sell ANY quantity for the market price under perfect competition?
I keep hearing that under perfect competition, an individual firm can sell ANY quantity as long as they sell at the equilibrium price. But this doesn’t make sense to me. For the market supply and ...
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Simultaneous Causality and Variance within a supply and demand model
Given two single-variable regression equations, one for Demand and one for Supply, both with error terms and a constant. How does one solve for equilibrium quantity, price? Obviously you can set ...
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What's the math behind increased supply in perfect competition leading to decreased price?
If it suddenly becomes much easier to produce, and marginal cost decreases (supply shifts out), then to continue producing at the optimal quantity, firms will produce less--but at the same price, ...
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What is the math behind increased savings leading to decreased interest rates?
In a general commodity market, if it's easier to produce, i.e. Marginal Cost decreases,
then producers will produce more and at a lower price, as the optimal quantity is at MC = MR and MR is always ...
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