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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3answers
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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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86 views

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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2answers
50 views

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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29 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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87 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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97 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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48 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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48 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"...
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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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343 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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31 views

Analytical approach to estimate equilibrium price for Real Estate Property

I am looking to calculate the equilibrium price, i.e an optimal price that I can set without affecting demand and maximize revenue. I've gathered historical data: occupancy rates, asking rents for ...
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37 views

$a\geq 0$, $x\succsim y$ implies $x+a\succsim y+a$ so the preference is linear?

$\succsim$ is a continuous and local non-satiate weak order. $x,y,a$ are vectors in $\mathbb R^n$ We say $a\geq0$ if all directions of the vector $a$ is greater or equal to zero. We want to prove (...
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17 views

What are the consequences of price-capping non-perishables undergoing temporary demand-spikes?

Due to the recent coronavirus outbreak (2020 for future readers), many consumers worldwide are overstocking on non-perishable products like toilet papers and hand sanitizers, in order to avoid ...
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42 views

Why would the price of goods rise up after increased consumption due to the outbreak?

On the wake of the COVID-19 outbreak, consumption of some goods will increase. But, my question is why so? My understanding is that, since aggregate demand for these goods has increased, supply can'...
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Considering existence of firms with sticky prices of goods, why are we sure that SRAS will be upward slopping?

One of theories that explains why the SRAS is upward slopping is the theory of sticky prices. For an example, suppose there is inflation. In the short run it will take different time for firms to ...
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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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45 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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102 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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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 ...
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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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291 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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21 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
129 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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39 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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30 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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1k 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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674 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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108 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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83 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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23 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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410 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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60 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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79 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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1answer
21 views

Interest rate determination in the real world

I have just learnt about the demand and supply framework for money and how the equilibrium interest rate in an economy can be determined. In theory, based on that framework, an increase in nominal ...
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simple aggregate demand GDP question

Explain whether aggregate demand responds more, less, or in the same way to changes in autonomous consumption when taxes depend or do not depend on GDP. I think the answer is more. As in my ...
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26 views

Using ML to estimate demand function

Say, I am looking to estimate the demand curve for rental of a real estate property. The demand varies depending on time of the year, location, economic and demographic variables. I'd like to ...
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21 views

Few questions regarding treasury bills

I have a few questions regarding repurchase markets. My professor told our class today that Repo (Repurchase) Markets are essentally markets where the government lends corporates a very cheap rate of ...
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29 views

What if the government impose both price control and supply restriction on the market?

Due to the virus outbreak, there is a surge in demand for mask and hand sanitizes. To prevent price hiking government impose a price ceiling on the products, however consumers are behaving irrational (...
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18 views

(AD-AS model) How is it possible for firms to spend less, but supply more at higher price level, assuming no increase of the SRAS?

According to the interest rate effect theory higher prices will lead to lower GDP demanded because firms will spend less due to loans being more expensive. It seems at odds with what the SRAS curve ...
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Does fiscal policy always shift the AD more than the SRAS?

I noticed that when I read about fiscal policy and the AD-AS model, it looks implicitly assumed that when we use fiscal policy we intend to shift the AD, even when the economy experienced a negative ...