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.

Filter by
Sorted by
Tagged with
0
votes
1answer
48 views

Everyone has the same marginal rate of substitution

I'm currently reading Varian's Intermediate Microeconomics and what struck me, is this statement on page 89 of the 8th edition. If everyone faces the same prices for the two goods, then everyone ...
2
votes
1answer
531 views

Supply curve when the marginal cost is zero

The supply curve is built as the average marginal cost (MC), when the MC is equal or higher than the average cost (AC) The marginal cost increases, as a result of the opposite effect of marginal ...
1
vote
1answer
22 views

Clearing price in a double auction market

I have been reading a paper on energy markets and I have stumbled upon double markets and clearing prices, which got me quite confused (bare in mind, I am relatively new to this topic). Quote from the ...
3
votes
2answers
83 views

By what means do prices change?

The classical supply and demand theory states that prices and quantities of a given good (in a perfectly competitive market) are determined by the supply and demand of that good, a shift in the demand ...
0
votes
1answer
34 views

Constant elasticity proof for log-linear demand curve

From Perloff 2008e solved 2.2: Q: Show that the elasticity of demand is a constant e if the demand function is log-linear, ln Q=ln A+e ln p. A: Differentiating with respect to p, we find that (dQ/dp)/...
22
votes
4answers
4k views

How can power/electricity prices be negative?

Bloomberg shows this chart: I understand the above chart to mean that consumers were actually paid to use electricity. (Please correct me if I'm mistaken.) I was wondering how this is possible? How ...
0
votes
0answers
26 views

Why should houses have the same price for a given supply

So I'm reading Varian intermediate microeconomics and in chapter one it's about housing. Suppose we have a inner ring and a outer ring in a city where there is a university. In the inner ring supply ...
2
votes
1answer
30 views

A weaker definition of local non-satiation can also imply indifference “curve”

Let $u$ be a continuous utility function on $\mathbb R^2_+\setminus\{0\}$. Consider the following three conditions: Local non satiation says that for any $x \in X$ and $\epsilon > 0$, there exists ...
0
votes
2answers
35 views

Trying to understand ceiling in supply and demand on picture

I am having one problem, which I do not understand. Let's assume the government applies ceiling price below the equilibrium price. I colored it red in my graphs. Of course, supply would decrease, ...
0
votes
2answers
17 views

How does a division of a company spinning off from it's 'parent' company change it from a cost center to a profit center?

Reading an article about how many IT divisions of big companies in Japan, became seperate companies. The motivation is apparently to turn them in profit centers. Can anyone explain how becoming a ...
0
votes
0answers
14 views

Affordable reservation prices

An important theoretical construct in microeconomics seem to be reservation prices, i.e. the maximum price a person is willing to pay for something. Consider a typical market basket of goods a person ...
0
votes
0answers
34 views

The law of supply and demand - How does it work?

I've learned what the principle of supply and demand says, and would paraphrase it like this: The price of a good is at equilibrium when supply and demand are equal. Or with other words: The ...
3
votes
0answers
69 views

Linear Homothetic Utility

A Homothetic Utility is where $$ \forall x,y, \forall a \in \mathbb{R}_+: \ u(ax,ay)=au(x,y) $$ (or its monotonic transformation). A linear Homothetic utility is defined as $$ \forall x,y, \forall ...
0
votes
1answer
28 views

Understanding the gradient of the social cost curve in a market failure/ negative externalities diagram

Why does the social cost supply curve in a negative externalities diagram have a steeper gradient than the private cost to firms? I assumed it should only be shifted upwards as the negative social ...
0
votes
1answer
56 views

Supply curve for a competitive firm with constant MC

I know that for a perfectly competitive firm, the supply curve is given by $p=MC \ge AVC$, where $AVC$ is the average variable cost. Now I get really confused when the $MC$ comes out to be a constant....
1
vote
2answers
1k views

Difference between Giffen and inferior goods. Why aren't all inferior goods Giffen goods?

What is the difference between an inferior good and a Giffen good? Are the two following definitions for an inferior good equivalent? Def 1: An inferior good is a good for which the demand decreases ...
-1
votes
3answers
71 views

Why is demand curve always going down?

In many economic charts with demand and supply curve, people often say the demand curve goes down with more quantity. But I will give you a really practical example, why I think they are wrong. ...
0
votes
2answers
71 views

Why hasn't the huge increase in supply provided by Airbnb decreased prices?

Simple supply and demand economics would suggest that the huge increase in the supply of rooms to rent by Airbnb should have reduced the price of rental significantly in those cities where Airbnb is ...
-1
votes
1answer
850 views

Quick Question on Production Possibilities Frontier Curve

Can someone please tell me how or why the curve shifts outward. In the textbook, I was given that: "But if we cut production of mobile phones to 3 million this year, we can produce 2 mobile phone ...
2
votes
1answer
58 views

WARP implies completeness, transitivity and thus rationalizability. What is wrong with the statement?

Let $A$ be a menu and $R$ be a complete and transitive binary relation. Define choice correspondence generated by $R$: $$c_R(A)=\{x\in A|| xRy \ \forall y\in A\}.$$ Theorem (from Kreps 1988): for ...
0
votes
1answer
24 views

Are there more historical examples of big change in prices thanks to demand/supply changes like the tulip mania?

I'm currently searching for historical changes in prices as a result of a big/sudden change in demand/supply, like the tulip mania in Holland. Are there any notable examples?
3
votes
2answers
70 views

Will the third Heathrow runway fill up within 25 years?

From a Wired article published 9 June 2018 about the proposed third Heathrow Airport runway: But Warnock-Smith1 warns that Heathrow will eventually fill up again unless air travel is redistributed ...
4
votes
1answer
94 views

Can marginal revenue be increasing?

As per my calculations, the derivative of the MR curve is given by: $MR'(q)=2p'(q)+qp''(q)$, where $p(q)$ is the inverse demand curve. Therefore,for a downward sloping demand curve, if the second ...
0
votes
2answers
43 views

If aggregate demand and supply do not have a specific value, what is the point of the formula?

I have been learning about aggregate supply and demand. I have just read this answer which states: "Aggregate supply is a relationship of price level and output. It is a function, or a curve, or a ...
1
vote
1answer
38 views

Problem finding Demand Function

I am analyzing pricing for a new streaming service for a school project. My thought is to calculate the demand function of a player in the same industry and then calculate the optimal price. I am a ...
3
votes
3answers
272 views

Why can't the Land-Value Tax (in some cases) be passed on to tenants?

According to https://en.wikipedia.org/wiki/Land_value_tax: Because the supply of land is essentially fixed, land rents depend on what tenants are prepared to pay, That doesn't make any sense. If ...
8
votes
1answer
232 views

eBay economics - total revenue impact from expanding ecosystem by 1 seller

While I think my question is straight forward, I'm guessing the answer to it is anything but. Thanks in advance for any insight you may be able to offer, even if it's just a directional assist. Here'...
0
votes
1answer
35 views

Which impact would have to introduce 15 times more soy in the worldwide prices of soy?

Soy is a commoditie and the main export of Argentina. It's said Argentina has 40 millions of hectareas of arable land and it produces food for 400 million persons and that potentially could make food ...
0
votes
1answer
79 views

Effect of money supply on price level

Consider a macroeconomy defined by following equations M = kPy + L(r) ; S(r) = I(r) ; y = m ; Where M is money supply, P is price level, y is output, r is interest rate, while k,m are constants. S(...
3
votes
1answer
50 views

Perfectly competitive constant MC Questions [closed]

If I have a market in which I have constant MC, no fixed costs, and perfect competition- when would it make sense for a new firm to enter the market(granted they have the same technology)? Would I ...
0
votes
0answers
12 views

Macro economics drivers in supply chain

I am working on building a sentiment indicator for companies and investors in the supply chain. I am looking for interesting research on the macroeconomic drivers in the global supply chain (...
1
vote
2answers
93 views

What is a good way to generate realistic utility curves?

I am aiming to program a basic simulation of a simplified economy to look at the impact of various interventions. The economy will have N groups of homogeneous consumers and M producer / employer ...
0
votes
1answer
46 views

How can you model/simulate the price/value of a good?

Let's say that you have a good which price can change quite often because of its demand. Let's assume that you developed an algorithm that changes continuously the supply of the good to make its value ...
2
votes
1answer
37 views

Predicting Shifts in Supply and Demand for Loanable Funds

I know the answer is A.  but I need an explanation on why. I thought government savings would decrease since they have less tax revenue, shifting savings left and interest rates up. I could see how ...
0
votes
1answer
24 views

Getting a market supply curve from firm supply curve

PFA the image below. As there are n firms in the market, and a tax of t moves up the cost curves of an individual firm by t units, shouldn't the cost curve of the market move up by n*t units? If yes,...
1
vote
0answers
32 views

Economics of Selling Software

My understanding: Normally, selling a product has an increasing marginal cost per unit produced. Very often this increases more and more due to poor allocation of resources (diminishing returns). ...
0
votes
1answer
26 views

Understanding what's in the frequently reported and discussed high demand in IT specialists in Germany - is the IT Fachkräftemangel real?

So far, I can observe the following contradictory evidences what I perceive from the media. Statement group #1. In the press, there are repeated reports from different sources about missing ...
1
vote
0answers
51 views

Does the reciprocal of the price elasticity of demand have an interpretation?

I have 2 related questions that i think are straightforward but am worried I have over-simplified! (i) Suppose the demand curve is downward sloping and the supply curve is upwards sloping. Suppose ...
0
votes
0answers
19 views

Supply/Demand Shift (Find New Equilibrium)

Starting: supply curve $y=x+10$ and demand curve $y = -x+30$ with equilibrium at (10, 20). The problem states that DEMAND shifts leftwards by 3 units and to find the new equilibrium. My professor did ...
0
votes
1answer
39 views

Demand Curve Price not perfectly elastic

I'm trying to make the argument that our Sales go up when prices for all our Products are 30% off. Which I believe should be our new Regular Price. but our Demand Curve doesn't support this. Should I ...
0
votes
0answers
31 views

Supply/Demand Curve Equation (beginner) [duplicate]

The linear demand function is $Q_D = a + b(P)$. I understand from this thread that it can be thought of as a simplification/magnification of the overall demand curve. Is there an equation that ...
0
votes
0answers
10 views

Building an square product-to-product table based on rectangular supply and use tables

I need a product-to-product input-output (I-O) table to conduct environmentally extended I-O analysis. I have supply and use tables at basic prices relating different industries and products, but ...
0
votes
1answer
531 views

Short run Aggregate supply curve is horizontal or positively sloped?

I want to understand the adjustment process from Very short run production decision to Short run production decision to Long run production decision. As far as I've understood: consider an increase in ...
3
votes
1answer
74 views

Economics Behind the Insulin Shortage?

A lot of my family is concerned about a future insulin shortage and it's reported that this shortage is growing. When I read articles from Harvard about it, they imply it's pure greed: There are ...
0
votes
0answers
20 views

AMD and Intel duopoly

What kind of duopoly competition model do these two companies "follow"? I'm doing a work in which I aim to analyze the economic outcomes after Intel's chip shortage in november 2018. Any links for a ...
1
vote
0answers
53 views

Origin of the saying “High prices are their own cure.”

Edwin Cannan (1915): An old epigram says that high prices are their own cure. Other variants of this "old epigram" include: High prices cure themselves (1911). High prices cure high prices ...
1
vote
1answer
101 views

Can Direct Taxes on the consumers have a impact on the Demand (rather than supply)?

I'm a 12th-grade student doing a school research paper evaluating the effectiveness of the recent increase in Additional Buyers Stamp Duty in the Singapore Housing market. This tax is directly imposed ...
1
vote
0answers
14 views

Supply elasticity on a piece-wise linear supply function

The supply elasticity at a point is the willingness to produce more or less after the price has changed (due to whatever reason?). $$\mu_{Q,P}=\frac{\partial Q_S/Q_S}{\partial P/P}=\frac{\partial Q_S}...
1
vote
0answers
103 views

Real world examples of supply curve shapes

I get the basic intuition that at higher prices, produces would be willing to produce more, but I feel like theory can only take my understanding so far. I want to know what are the real world ...
-1
votes
1answer
57 views

Anti Piketty Confusing Movement Along Demand Curve with Shift

In Anti-Piketty, the author's claim that the statement "If the supply of any good is insufficient and it's price is too high, then demand for that good should decrease which should lead to a decline ...