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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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From single-consumer-multi-units to multiple-consumers-single-unit

When I took a course in consumer theory, the economy always had a single consumer, represented by a monotone positive utility function $u(x,y)$ and an income $I$. Given prices $p_x$ and $p_y$, it is ...
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Why do firms bother to produce at equilibrium quantities if at equilibrium quantity, MR < MC?

For almost all demand curves, the resulting marginal revenue curve is often to the left of and steeper than the demand curve. The marginal cost curve has its distinctive U-shape, and a particular ...
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Re-evaluation of Consumer Price Index (C.P.I.) weights

This might be a very trivial question, however I can't seem to find a very useful answer for this. Problem: How are the weights of the various household items in the Consumer Price Index (C.P.I.) ...
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Can we “prove” that slow growth is due to deficient demand?

We hear more and more these days about growth, particularly in the Eurozone and Britain, being beneath its long-term trend due to deficient demand. I can think of a few things which support that idea -...
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Basic microeconomics: supply, demand and substitutes in production

The question is: explain the change in the market for skim milk, if demand for ice cream rises. I'd say these two are unrelated in consumption (saying they're substitutes is kind of stretching it), ...
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How do you find marginal revenue if you don't have a production function?

I was given a word problem. No formulas. So I set up the following equations: Demand Function \begin{equation} D(p) = a - p \end{equation} Cost Function: \begin{equation} c(q) = 9 + 10q \end{...
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Effect of information on stock indices

The rules for including a stock in indices such as S&P 500 are common knowledge, so everyone can know when e.g. company B is going to enter the index instead of company A. Since ETFs and mutual ...
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Price Elasticity of Demand for Positive Price Increases

What does it mean when the price elasticity of demand %Qd/%P is greater than one? Typically I hear that it means the demand is elastic since if, say, the price decreases by 1% the demand for the ...
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Usage of natural gas in 1970 (where was the demand elasticity?)

The following historical graph of US Marketable Natural Gas volume has me puzzled: How was the gas used in 1970 (a peak production period), given that we would seem to be using a lot more gas now? ...
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When would prices increase according to Malthusianism?

Malthusians and Neo-Malthusians believe that, eventually, the population of the earth will be exceed the number of people able to be sustained by the earth's food production. As such, they advocated ...
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Is this supply and demand reasoning in Picketty's book circular?

In his hugely successful book, Thomas Piketty writes: To be sure, there exists in principle a quite simple economic mechanism that should restore equilibrium to the process: the mechanism of supply ...
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What is the advantage and disadvantage to have a high value of USD for USA?

What is the advantage and disadvantage to have a high value of USD for USA? China and Japan always want to keep their currency low as oppose to USA.
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Analysis of free goods

The normal supply and demand models take the supply and demand of a particular good and show that the equilibrium price is where the two curves intersect. At this point, all the people below the ...
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Is stock investment an example of demand curves that slope upwards?

The law of demand implies that when the price of a good rises, people buy less of it. This makes the demand curve slope monotonically downwards. A textbook exception is the so-called Giffen good that ...
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Is there a class of demand functions that deliver equal surplus to consumers and a monopolist?

Consider a market with a monopolist firm that has zero marginal cost and faces demand $D(p;\mathbf{a})$, where $\mathbf{a}$ is a vector of parameters and $p$ is the price. The monopolist maximizes ...
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What are Giffen Goods?

What exactly are Giffen goods and are they of purely theoretical interest or has there been empirical evidence of their existence?