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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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'...
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163 views

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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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 ...
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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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3answers
585 views

Is the labor force participation rate related more to labour supply or to labour demand? Or both?

I have read several Labor Economics books, but I am stuck. Is the labor force participation rate related more to the labour supply or to the labour demand? If the labor force participation rate ...
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40 views

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 ...
2
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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 ...
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62 views

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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89 views

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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46 views

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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47 views

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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87 views

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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309 views

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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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). ...
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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 ...
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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 ...
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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}...
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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 ...
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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 ...
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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 ...
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14 views

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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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 ...
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36 views

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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374 views

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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42 views

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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321 views

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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58 views

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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81 views

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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82 views

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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22 views

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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22 views

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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334 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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2k views

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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57 views

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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86 views

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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64 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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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 ...
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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 ...
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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 ...
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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 ...
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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....
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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 (...
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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 ...
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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 ...
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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 ...
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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 ...
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1answer
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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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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 ...
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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(...