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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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Do multiple equilibrium points make sense?

Classical supply and demand examples use linear functions for both supply and demand. From a mathematical standpoint, this guarantees that there is at most one intersection, which corresponds to the ...
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Why is almond butter so much more expensive than peanut butter?

Why is almond butter so much more expensive than peanut butter? At least this is true in the 🇺🇸, where I've seen almond butter 2× as expensive.
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Declining housing prices led to decrease in demand?

From Blanchard et al. (2017). Macroeconomics: A European Perspective: "When, in 2006, housing prices started declining in the USA, most economists forecast that this would lead to a decrease in ...
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In the supply demand model $Q_s=a_0+a_1P+u$ and $Q_d=b_0+b_1P+b_2Y+v$, is it true that $a_0,a_1$ are identified while $b_0,b_1,b_2$ are not?

In the supply demand model $Q_s=a_0+a_1P+u$ and $Q_d=b_0+b_1P+b_2Y+v$ and $Q_s=Q_d$, where $P$ is price, $Y$ is income, $u,v$ are the unobserved error terms. what are the identified parameters and ...
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How would you check that you've reached market-clearing price in a market?

I have ~10 years of data about the product offerings of a given market. I can see the offers and compute unit costs. I don't have data on demand (i.e., sales). My original idea was to check whether ...
aedcv's user avatar
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Price ceiling and short side

Is supply always the short side of the market when imposing a price ceiling? Does this also mean that demand is always the short side of the market when imposing a price floor?
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Aggregate Supply derived from Wage Setting and Price setting equations

In Blanchard's Macroeconomics textbook, Aggregate Supply relation is derived from wage setting and price setting equations as such: $P = (1+m) W = (1+m)P^e F(u,z)$, which implies that an increase in ...
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Modelling agglomeration effects

In this video, Glaeser sets up a demand curve for housing in a city, where there are agglomeration effects: bigger cities have higher wages, so demand (willingness-to-pay) is increasing in city size. ...
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What are the shifters of demand and supply for loanable funds?

So far what I think is true is that changes in government borrowing and savings behavior shift demand and supply, respectively. I am definitely missing shifters, so I was wondering what they were.
Tony Stark's user avatar
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Individual Consumers Representation on the Demand Curve

I recently watched an educational video titled “Understanding the Demand Curve: Shifts and Consumer Surplus”. In the video, individual consumers were associated with specific points on the demand ...
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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 ...
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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 ...
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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 ...
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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 ...
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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?
Huy Lê Thanh's user avatar
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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 ...
Stefano Cirolini's user avatar
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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 ...
Chemistry student's user avatar
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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 ...
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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: $...
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
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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
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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 ...
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?
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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
213 views

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
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2 answers
437 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 ...
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