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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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
609 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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25 views

What do the excess supply and demand numbers in this chart mean?

From Econ 101, I thought markets are supposed to equilibrate so that there isn't any excess supply or excess demand. But from a WSJ story, we have the chart below. I believe it says, for example, ...
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42 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 ...
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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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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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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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334 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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24 views

Profits and Aggregate Supply

I feel like this is quite a stupid question, but I can't wrap my head around it. Why do suppliers make less of a good as profits drop? Intuitively, shouldn't they make more of the good in order to ...
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40 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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73 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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15 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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225 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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20 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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3answers
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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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38 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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17 views

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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800 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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507 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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79 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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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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83 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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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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376 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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59 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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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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71 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
1k 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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Could a global supply decline lead to higher profits?

Imagine the following scenario: There is a market with some good. The demand curve stays the same over the whole scenario. Due to an unfortunate event (e.g., bad weather), the production lowers. All ...
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18 views

Calculate profit when trading between more than two goods

When trading two goods (or currencies) it is relatively easy to say if you are making profit when you know the exchange rates. For example Person A trades Bananas for Person B's Apples. Person A gives ...
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Supply elasticity of finite (non-renewable) resources

What is the elasticity of supply of a finite (non-renewable) resource that cannot be replaced (i.e. fixed stock)? Intuitively it seems like it should be inelastic, yet I can also reason elastic.
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Are businesses and individuals buying clean / green / renewable energy contribute to slowing down the climate change?

I'm not sure if an individual choosing a "green energy supplier" is making any difference. My (potentially naive, uneducated) logic is as follows: ...
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12 views

Uniform price vs discriminatory price double auction

Uniform price and discriminatory price double auctions are the most commonly used auction mechanisms in the trading markets especially in peer to peer energy trading markets. However, I could find ...
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11 views

How to calculate clearing when supply demand curve do not intersect

I am working on a P2P energy trading project and want to implement a uniform price double auction. I have confusion about how the clearing price will be determined if the supply-demand curves do not ...
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Is the supply of a price-taking firm increasing in price?

Is the supply of a price-taking firm increasing in price? When the price goes up, this means that firms can make more profit. Therefore, they would want to increase their supply. Is there a way to ...
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Examples of textbook definitions of transaction costs, for a non-econ student

I'm not an econ major, neither am I taking it as a minor, however seemingly out of nowhere economics has jumped into my CS class when talking about the role of IT in reducing transaction costs of ...
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23 views

Cobb-Douglas demand yields a zero marginal revenue, monopolies don't exist?

From here and a pile of maths that I've done myself, $x_1 = \frac{a}{a+b}\frac{m}{p_1} \\ x_2= \frac{b}{a+b}\frac{m}{p_2}$ This yields inverse demand equations, when you have numbers stand in for $...
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Question Regarding Equilibrium Price & Surplus

So here's an example of a standard Supply & Demand Relationship for an Individual Supplier: As a supplier, for 1 dollar, I'll produce 1 unit of something. For 2 dollars, I'll produce 2 units, for ...
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“Supply creates its own demand. Only by consistently supplying it can we hope to increase the demand for the substantive over the superficial”

Keynes has disapproved the say's law "supply creates its own demand" but I want to know if there is any empirical evidence that this law doesn't hold true? Theoretically, keynes successfully ...
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23 views

Perfectly elastic supply

How would you algebraically write a perfectly elastic supply? Will it be infinite at price = 4? (The choice of the number 4 is completely arbitrary)
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41 views

Most profitable conversion of stock into money

When Forbes-lists of top billionaires are published we are usually aghast of their riches and statements such as "the 8 richest people own as much as the poorer half" are disseminated. I was ...