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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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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'...
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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 ...
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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 ...
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184 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 ...
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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?
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Dynamic demand model in many good competitive markets and price optimization

This is a question about demand models, price optimization, dynamic pricing, big data, online learning, so I will cross-post in other communities. $\mathbf{Background}$ I am interested in dynamic ...
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What would be the consequences of universal parity of buying power (wage value) and freedom to buy?

I've wondered about this for many, many, years..... maybe there's an answer (or several answers?) after all. As the global economy is set up, one reason a person in the US and EU can afford a nice ...
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Estimating Demand for Goods with n Choices

I have a data set containing n observations (rows) of mobile applications. The dependent variable is the number of installations -- the variable is categorical (with more than 2 categories). Therefore ...
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Positive effects of a Tunisia-EU free trade agreement?

Tunisia might be signing a free trade agreement with the EU very soon. It's called ALECA or DCFTA. Many activists and labor unions are opposing such an agreement because it would result in losing ...
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Simultaneous Equation Models for Estimating Demand for a Good

Suppose in an economy there are $G$ available goods $X_1,...,X_G$. We can formulate a system of $3G+1$ equations as below: $$Q^d_g = A_{g1}+A_{g2}P_g+\mathbf{A}_g\mathbf{Z}^d_g+u_g\quad(g = 1,...,G)\...
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Empirical Evidence of Cournot Competition?

Is there empirical evidence to validate the use of Cournot competition between multiple suppliers and a buyer? Are there models which extend Cournot competition to different levels in a larger supply ...
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Is this Economic Engine Cold Start theory valid? (ie: could it work?)

First, I am not an economist so forgive me if the wording is not correct for the discipline. Second, I suspect this may end up being a "discussion" before it becomes an "answerable" question in which ...
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Did I do something wrong in calculating the market equilibrium?

Sorry for asking such a silly question, but something seems odd about my answer to this question: Suppose that two consumers, Jeff and Walt, are the only consumers in the market for carrots. Jeff’...
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Supply-side economics: reduction in tax

In a nutshell Supply-side economists support reductions in tax, because government revenue can increase (according to the Laffer curve) and businesses and consumers will be incentivised to invest (...
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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}...
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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 ...
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Using capacity share instead of quantity market share in demand estimation (BLP)

If I were to use capacity share (as a proxy of quantity market share) in a demand estimation setup (such as BLP), are there ways to deal or interpret the measurement error? I would consider this ...
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Deriving Single Good Demand Curve

came across a problem set that I had no clue how to tackle, but looks painfully simple. It's a market for electricity where households utility is represented by: U(E) = aE - 2mL2 (Household Utility) ...
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How does changing the Bank of England base rate work?

If we assume the demand for money (D above) is fixed in this position (for the purposes of this question), and supply (S) is fixed in this position, then how can the BoE change market interest rates (...
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What are the (immediate) effects of changing a good's price on consumer and producer surplus?

Basically, I'm trying to understand why the total surplus is maximized at the equilibrium and what happens if the price isn't at the equilibrium. Say the price of a good is the equilibrium price. ...
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How change in technology affects the price of labour and capital?

If the technology improves how does the price of labour and capital change. We take the neo-classical assumption that demand for each factor depends on it's marginal productivity, and demand and ...
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How price and quantity of ice cream sold changes when the price of yogurt reduces?

I am a newbie at economics and would appreciate help from the community. Question Use the model of supply and demand to explain how a fall in the price of frozen yogurt would affect the price of ...
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National Capital Outflow Question

I have the following example for an imposed quota on the importing of Japanese cars to Europe and it's relative effects: I am told that $NX=NCO$ (Net exports are equal to National Capital Outflow). I ...
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How can I model immigration and xenophobia economically using these equations?

I'm trying to put together a toy model for immigration ($I$), labor prices ($w$), and a measure of xenophobic/nationalistic sentiment ($A$). What I've come up with so far is the following: $$\frac{dI}...
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Modelling Supply Induced Demand

How would one go about modelling "supply induced demand" (SID) using the regular supply and demand model and how is SID different from price discrimination?
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Can overreporting the oil production cause a fall of the oil prices

The top news today is a discovery that oil production was overreported by 800 thouthand barrel a day. Could it cause 5x price fall during the year? Such allegations challenge the market theory, IMO, ...
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Is there a simple way to write a model with firms/sectors with different demand elasticities?

I would like to write down a model where there are firms with different demand elasticities: For some firm's total profits increase and decrease a lot with increases and decreases in demand for their ...
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298 views

Calculating a cross price substitution/income effect

I am given a utility function $U(x,y)$, income $I$ and prices $p_x,p_y$. Then the price of $y$ rises to $p_y' = 3 \cdot p_y$. How are we supposed to calculate the substitution effect and income effect ...
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Difference between short run and long run supply curves?

We know that in short run supply curve is horizontal which means that prices remain rigid while quantity of supply adjusts according to demand. However, in long run this reverses. I know about some ...
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Market with substitutes: Response of prices and quantities

The demand function for theater tickets is $D_t(p_t,p_c)$, where $p_t$ stands for the price of theater tickets and $p_c$ stands for the price of cinema tickets. Supply of theater tickets is described ...
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how can devaluation of a nation's currency lead to increase in government expenditure, hence facilitating economic growth

how can devaluation of a nation's currency lead to increase in government expenditure, hence facilitating economic growth. I was reading through a textbook and saw that the devaluation of a nation's ...
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62 views

What will happen to property prices if local currency weakens against USD?

Say that the conversion rate of a local currency changes so that the currency is now relatively weaker against foreign currencies and as a result the inflation rate increases and as a result of that ...
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What is the difference between horizontal short run aggregate supply curve and positively sloped short run aggregate supply curve?

Both of these curves corresponds to short run then what assumption leads to first one and what leads to second one? For horizontal SRAS we say that in the short run when we have aggregate demand of ...
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Commodity price and production data

I am doing some modeling and need some data. First I would like to get some data on commodity prices, ideally historical price data (but current quotes are fine). For example it would be nice to ...
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36 views

Demand Function

In cost and demand problems, why is the equation for price per unit named the demand function, as shown in the examples below? Also, why is it equal to a constant minus some multiple of the number of ...
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What happens to equilibrium health stock if interest rate goes up for other capital goods?

The question above/title is one of the questions in our previous exam. Is the answer a movement along the MEI (Marginal Efficiency of Investment) curve since the cost of capital or opportunity cost of ...
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Optimization of supply between multiple distinct demand 'markets'

I am attempting to solve the following optimization problem, and am curious if it is doable without an iterative process. Consider the following: 1) Two distinct markets (Market X and Market Y) with ...
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How can you show crowding out doesn't occur in a liquidity trap on a graph?

'In a liquidity trap, the excess rise in savings means that government borrowing won’t crowd out the private sector because the private sector resources are not being invested, but just saved. ...
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Price Elasticity and Total revenue

So my question is, they say when the demand is inelastic and we raise the price the total revenue goes up, now suppose a 25% rise in price results in a 24% fall in demand, and I know it is very close ...
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How does stamp duty tax in Australia affect demand and supply of housing?

How would introduction of a stamp duty tax in Australia affect the demand and supply of housing? Would it shift the supply OR demand curve (and in which direction)? How would the market price change (...
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How to proceed with safety stock calculation when demand is constantly fluctuating?

I'm trying to start and switch off our inventory management into a safety stock system to avoid stock outs and lessen inventory costs. Our current system is made-to-order, such that when we receive ...
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Can someone explain me the relation between effective demand in terms of wage-units and output elasticity?

I have been stuck in the next text. Can someone explain it to me? Thank you. It is possible for effective demand in terms of wage-units to increase when the output of an individual industry is ...
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Why or when does the area under the demand curve equals the total utility for consumers (perfect competition)?

Why or when does the area under the demand curve equals the total utility for consumers (perfect competition)? From the demand side, one knows that when combining the utility function and the budget ...
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Why is the Marginal Social Cost supply curve more efficient than the Marginal Private Cost supply curve?

In my microeconomics class, we are currently learning about externalities. Below I have a picture from my TA's lecture. The idea is that the point where the demand line intersects the Marginal Social ...
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Is there really a „healthy“ amount of unemployment?

Is there really a certain level of unemployment a state should have for a working competition? We’ve learned it’s necessary for the enterprises to have a reason to keep their employees. I think it ...
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Graphing Volunteer labour Supply

I'm wondering if there is a method by which we can visualize a firms decision to rely on volunteer labour. I have an idea but I'm unsure if it is correct, please tell me if there is an issue with my ...
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In which market form does the firm try to maximize the quantity demanded?

Suppose there is a market form with the following assumptions: 1) The good sold in exactly identical. 2) The number of firms is very large and each firm is small compared to the Industry. 3) There ...
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Finding the market price paid by producers?

I am trying to understand a new concept that relates on to producers on a supply and demand graph. I understand the concept of market clearing prices, and market equilibrium point that can help me ...
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How does supply and demand determine price for the following scenario?

Two individuals are stranded on an island. Bob and Jill. By themselves they can produce: Bob: 5 fish & 5 coconuts Jill: 5 fish & 5 coconuts If they specialize and trade, they can produce: ...
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demand driven electricity Feed-in tariffs in Germany

Depending on the daytime, month etc. the demanded electrical power in the grid is varying a lot. https://www.energy-charts.de/price.htm Due to that, the price per Kwh is varying as well. Now the ...