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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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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?
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How does Black Friday work?

On days like Black Friday, everyone rushes out expecting huge savings on everything they buy. The level of demand seems to reach ludicrous levels, and one would expect smart merchants to react by ...
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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 ...
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What do supply-demand curves really look like?

In my basic high school economics course, we've always used supply-demand curves that are lines to simplify calculations. In real markets for real goods, what do the supply and demand curves look like?...
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The supply and demand of Virtual Products

We know that the fundamental economic problem is scarce resources relative to unlimited wants. **Does this apply to apps and Ebooks?**They are essentially virtual products who have in theory have ...
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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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Teaching changes in “demand” v. “quantity demanded”

I am always struggling with teaching this one. The terminology of standard intro textbooks is unfortunate, although it's so pervasive that we probably have to live with it. By a "Demand", intro ...
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Are there any instances where short run demand/supply is more elastic than long run cases?

Conventionally both demand and supply for goods and services are both more elastic in the long run than in the short run. My Question Is there ever an instance where demand and/or supply for a ...
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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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In microeconomics : is this the contradiction in the atomicity of firms ?

Let $p$ be the market demand. It is a function of the market production $Q$. Let $q_i$ be the production of firm $i$. Reading Steve Keen (in Debunking Economics, chapter II) quoting George Stigler, I ...
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If the Engel Curve of a Cobb-Douglas utility function is positive and linear, than does that mean it is neither a necessity nor a luxury good?

Since the concavity of the Engel Curve determines whether it is a necessity or luxury (i.e. how fast quantity demand changes in relation to changes in income), and since the second derivative of a ...
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Supply/Demand of Smuggling

I am attempting a (very) basic analysis of smuggling from one economy to the other (Venezuela to Colombia) - arising from price ceilings ceteris paribus. e1 are the equilibria without intervention (...
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Establish demand curve with infrequent sales

I sell variations of an item on eBay. It is an unusual commodity which I purchase in bulk lengths and then cut to various sizes. They come in about 20 types, which I then sell as 10 different lengths, ...
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Can Linear Supply-Demand Equilibria Be Understood as a Feedback-Control Process?

I'm not an economist, but rather an applied mathematician working in control theory. I've recently been watching Berkeley's intro to econ course in a personal project to better understand economics ...
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Which utility function yields a constant price elasticity of demand function?

How do I know which utility function I can use to find an isoelastic demand function, e.g., $x(p)=Ap^a$? And similarly, which cost function can I use to find an isoelastic supply function? Does it ...
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What does a supply+demand curve look like for fare evasion?

Consider the demand curve for fare evasion on a train. The price (I suppose) would be the average amount of money paid per ride in fines, and the quantity would be the average number of fare evaders ...
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What's the effect of the used car market on car price?

While justifying his decision to sell a one-use textbook to his students, a BYU econ professor states: A word about the Kearl text. I do not receive any royalties and have no economic interest in ...
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Modelling Pay what you want

I have been trying to model a Pay What you Want scheme. Now, for a monopoly it is clear that monopoly will have more profit by setting monopoly pricing assuming all players are selfish. But consider a ...
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Why not say the buyer will *definitely* buy at price X?

In supply-and-demand curve, we draw curves of indifference. Say the demand goes through (1, \$1). Then Bob the Buyer is indifferent between spending \$1 for 1 apple or just keeping the \$1. If Sally ...
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What Creates the Price in the First Place

I just wanted to know if price changes how much quantity is supplied or demanded then what creates the price in the first place? If you say that price affects supply and demand and supply and demand ...
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Why does quantity supplied increase with price in economics?

The Law of Supply is my worst enemy in economics because I could never truly understand it, and as a result, the stuff I learned after that was built on a weak foundation. The Law of Demand is totally ...
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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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“For a market to exist there must be scarcity” (T/F)

The answer provided was 'true', that scarcity was necessary in the existence of a market. But isn't that not always true? For example, there's a market for canned air, and air is most definitely not ...
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Is there an economically sound way to decide between buying media or a streaming subscription?

How can a consumer (like myself) decide on whether they should pay for a music streaming service based on economic reasoning? Assumptions: The budget allows paying for a € 10/Month music ...
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Horizontal demand curve

If it is assumed that every consumer within a particular region has the same 'valuation' for a certain product, and consumers will purchase no more than one unit of the product, is the market demand ...
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574 views

Simple model to predict oil prices

Back when Hugo Chavez was still alive (former leader of Venezuela), he said they made "simulations" to predict how much oil prices will increase if they retire the supply of oil they were giving to ...
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How helpful is Hotelling's Rule in determining the price of oil?

After posting this question, I realized that there was quite a bit of controversy surrounding the use of Hotelling's Rule to estimate the price of oil. Participants on this site seemed to be evenly ...
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How can the bond market be overvalued when the value of a bond is a function of interest rates?

I seem to have a major misconception in my understanding of the bond market and how interest rates and demand and supply influence valuation levels. I hope someone will be able to clarify. My ...
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Question on significance of different ways of measuring Price Elasticity of Demand

I'm a pre college student, self studying economics, I have a question regarding the different forms of measurement of Price Elasticity of Demand. The basic equation for PED with respect to a point $(...
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What does a “sell-off” mean if every stock transaction is balanced?

If every stock transaction is "balanced" (1 sell = 1 buy), then what does a "sell-off" actually mean and how does it move the price of a stock? Ex. If millions of people sell a stock, there's ...
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1answer
261 views

Music Streaming Impact on Producers

I am currently writing a news commentary on music streaming services. My commentary is focused on demand and supply, consumer and producer surplus, externalities, and public goods. And there are a few ...
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Demand curve from logit model

Is it possible to derive a demand curve from a discrete choice multinomial model. For instance, a logit model would give the probability of purchasing each good. But can I translate that into a demand ...
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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 ...
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Question about Changes in Surplus

Will Both Consumer and Producer Surplus decrease as a result of a decrease in demand? Or is this not possible? Assuming there is a decrease in demand for travel, I'd like to know how this affects ...
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Usefulness of the value for the slope of the demand curve

I see the elasticity value(s) of demand being used frequently to determine the relation between demand and variables such as price and income. I have however been unable to find any uses for the slope ...
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Bizarre max {} notation

My professor gave us the following problem, but it uses a notation/syntax I haven't seen before $(q_{luke} = max \{ \dots \})$. She hasn't explained it or introduced it to us prior to this. What does ...
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Why, in supply and demand curves, does price go on the y-axis?

I know it doesn't actually matter which axis is which, but it seems less intuitive me. When I see a supply and/or demand graph, I always have to flip it in my head to feel like I really get what's ...
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Why does demand curve shift in, in a monopolistic competitive market?

In a monopolistic competitive market, demand curves shift in, if more firms enter the market. I can't seem to wrap my head around it. Demand remains the same, supply has increased. Shouldn't entry of ...
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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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Why is the Market-Clearing Price also an Equilibrium Price?

When the price is such that supply equals demand for e.g. bicycles, everybody who wants to buy a bike at that price gets one, and every bike gets sold. Everybody goes home happy and the marketplace ...
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Is there an intuitive explanation for the tax incidence formula from elasticity?

You're probably familiar with the formula for tax incidence (in a standard Principles framework) from elasticity. Specifically, that the consumer share is $$\frac{\varepsilon_S}{\varepsilon_S+|\...
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Have automation and technological advance been shown to have a positive impact on society and the economy or a negative one?

My friends and I, 2 of which are computer science majors think it is worse because is humans can't work and thus afford necessities, how will they survive? The definition of automation: the use of ...
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524 views

Demand estimation with a lagged dependent variable

Suppose I have the following structural equation for demand estimation in time-series: $$q_t=\beta_0+\beta_1\hat{p_t}+\beta_2incom_t+\beta_3q_{t-1}+\epsilon_t$$ Where $q_t$ stands for the quantity ...
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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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467 views

Could someone please explain the proof of Hotelling's lemma?

According to https://en.wikipedia.org/wiki/Hotelling%27s_lemma, the maximum of the firm's profit at some output is given by the minimum of the difference between the profit and the revenue. However,...
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Applying Economic Principles to Other Studies

I was recently reading this article about some research that was done concerning the illegal killing of elephants. There were two quotes that caught my attention: ...illegal killing [of the ...
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576 views

Why is food less expensive in India than the United States?

India has 4x the population, less land, and far worse technology and infrastructure than the United States. Shouldn't food cost in the US be less expensive? I've never been to India, but it seems like ...
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Why is the equilibrium price not anything between \$0 and \$200?

Consider the second problem below from Varian’s Intermediate Microeconomics: Suppose that there were 25 people who had a reservation price of \$500, and the 26th person had a reservation price of \$...
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478 views

Subsidies Incidence on Producers and Consumers

When calculating the incidence on producers and consumers using a demand and supply curve is dead weight loss a part of the incidence? I know that for example the producer's incidence is a rectangle ...
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Price Producers Receive as a Result of Indirect Taxes

In my economics class, we were introduced to the idea that if the government imposes an indirect tax on a good, the price consumers have to pay increases, but along with this increase in price for ...