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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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400 views

How to interpret income elasticity of demand

My question: Income elasticity of demand for apple is $\gamma$. Cross elasticity of demand between apple quantity and orange price is $\psi$, What is the impact on apple's revenue if consumers'...
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407 views

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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Unitary demand curve: p = 1 - q

In my text book, many theories are explained using ad unitary demand curve: a consumer can buy 1 quantity of the product, or none. The example of the demand function is $ p(q) = 1- q $ but that means ...
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My Challenge in Econ 101 explanation of Marginal Benefit = Marginal Cost

In Econ 101 textbooks, there are lots of examples and emphasis on marginal analysis leading to the greatest equation of all, $MB=MC$. My challenge is the following and wonder if anyone had a similar ...
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166 views

Demand curve deriviation

My fundamental concern is whether in real life when applying to microeconomic theory, we derive the demand curve using utility and indifference curves approach, or we simply may get data on quantity ...
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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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324 views

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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Determine the homogeneity of a demand function

If a demand function $X(P_X, P_y, I)$ depends only on prices and income. Is this function a homogeneous function?
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Market equilibrium and pareto efficiency

How can I prove that the equilibrum point $D(p)=S(p)$ is pareto efficient? The definition of pareto efficient: there is no way to make any person better off without hurting anybody else $D(p)$ is ...
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Can supply and demand curves be used in electricity modelling? [closed]

Can the (Supply and Demand) curves be implemented in electricity modelling for a country ? How can this be modelled and how can the user set the interaction point between supply and demand?
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Textbook claims that price level accompanied by decrease in interest rates?

I read from this textbook the following, quoted as: In addition, a decline in the price level is usually accompanied by a fall in the rate of interest... I interpret this as meaning: "A fall in ...
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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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What tools are available to understand situations where the supply curve is clearly a function of the demand curve?

Consider the "Matrix Regurgitated: Coming Only To Cinemas" market: Buyers. People who would potentially be willing to spend money to watch a 4th Matrix film in cinemas, if ever such a film were ...
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Which of the following explains that the price increase of oil cause the price of natural gas to increase?

A) Oil is inferior good while natural gas is normal good. B) Both of them are normal good. C)They are substitute goods and the higher price for oil increased the demand for natural gas. D)They are ...
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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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Finding labor supply function from equation of labor market [closed]

The supply side of the labour market is given by the following set of equations: Utility of worker is given by $$U = L^{\frac{1}{2}}C^{\frac{1}{2}}.$$ Real wage $w = 5$, T-Max = 40 hours, Investment ...
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How do we prevent big companies conspiracy?

These days we can see a bunch of troubling trends. Consumer goods are less quality. Big companies merge. Patent laws and strict requirements on appearance remove small entrepreneurs from the ...
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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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374 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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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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967 views

What is the difference between an Ordinary Demand equation and an Engel curve equation?

I mean, an Ordinary Demand Equation measures changes in quantity of X due to changes in price Px. Engel Curve measures changes in quantity of X due to changes in income M. But ODE has M in it's ...
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222 views

Tax Incidence and distribution

Although the tax incidence is generally dependent on the nature of the elasticity of the demand or supply, in special scenarios can the producer take up the complete burden of the tax so that the ...
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Why is GDP growth so important that central banks are trying to impose negative interest rate?

BoJ just announced its negative interest rate policy in an effort to drag Japanese out of a deflationary mindset and hoping to shift the demand curve to boost the economy. However, my question is, if ...
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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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Under what circumstances is an increase in national output called economic growth?

An increase in output can be achieved in two basic ways. The first scenario: Aggregate demand increases, so supply extends. In this way the economy is making more use of its resources, but there is ...
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Why Law of Supply indicate direct relation between price and supply?

According to Wikipedia, the Law of Supply states that: an increase in price results in an increase in quantity supplied. However, if the market was overflowing with a particular good (meaning ...
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How to estimate empirically a demand curve

Suppose I have a small business that sell ice creams. An Icecream cost 2$, and every day I have different values of sales. ...
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What Does “Quantity” Represent When Looking at Supply and Demand?

There are several possible scenarios involving changes in supply and demand that people are supposed to memorize in AS Economics. For example, when Either Demand OR Supply Move on Their Own: Rising ...
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What does an individual's demand function describe?

Now, this seems a super easy and straightforward question, right? From wikipedia: The demand curve is the graph depicting the relationship between the price of a certain commodity and the amount ...
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Demand Curves for Stocks

i am currently working on a paper on demand curves for stocks and have some questions. I've read that many models (CAPM, APT, Modigliani-Miller theorem) assume demand curves for stocks to be flat. Can ...
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What does this $(\gamma _{0.clothes} + \gamma _{1.clothes} * \ kids)$ term mean in my linear demand equation?

I have the following demand equation system (expenditure ratio model): $w_{clothes}= \beta _ {clothes} + \alpha_{clothes} * \ kids + (\gamma _{0.clothes} + \gamma _{1.clothes} * \ kids)* \ income + ...
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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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791 views

The Law of Supply

The supply of an individual firm indicates the various quantities of a good (or service) a firm is willing and able to produce and supply to the market for sale at different possible prices, during a ...
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Why does Venezuela have such a high Big Mac Index?

Venezuela is ranked #2 in the 2014 Big Mac Index at \$7.15 per Big Mac. You can see the graph here. However, Venezuela is not a very rich country, having a gross domestic product of \$11,789 per ...
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A Deceptive Raffle

Suppose we have a hungry fox. He has a gigantic bunch of spoiled carrots that he cannot eat (and wouldn't eat if they were fresh anyway), but he knows the local bunnies in the neighboring area love ...
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Could food storage prevent a depression?

In Genesis chapter 41 Joseph interpreted the dreams of Pharaoh about 7 years of plenty and 7 years of famine which resulted in saving Egypt from famine, among other things. I think this is a great ...
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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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Inverting price functions and their conditions/intervals

If I have demand functions For $P<15$: $$ Q(P) = 700-40P $$ For $P>15$: $$ Q(P) = 400-20P $$ If I invert them, I get the price functions For $Q<100$: $$ P(Q)=20 - (1/20)Q $$ For $Q>...
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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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Why do firm output decreases when fixed cost decreases in Long Run?

So in long run if fixed cost is lowered, more firms enter the industry and increase the supply, bringing up industrial output. According to the firm diagram, Average Cost lowered so that the firm ...
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Tax imposed on customer affects demand or supply curve?

I have a example of supply and demand. If there is a regulation that requires customers to pay additional tax when they purchase cigarettes, would supply or demand curve shift? I know that tax/...
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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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Is HIV An Economic Positive In Light of Human Overpopulation? [closed]

A few economists say that the human population is too high and if it continues to grow, may become too large for our planet to sustain it. While others can debate whether this is true or not, let's ...
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Removal of tax excise on producers, will increase supply?

If the government removes an excise tax on producers, will their supply increase? For example, Price of gasoline is $2 a gallon Producers are taxed at 50 cents per gallon by the government Weekly ...
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221 views

Are supply and demand always (with arbitrary dimensions but still) linear?

I have economics knowledge of high school level (and basic economics from my engineering degree), and I always noticed that supply and demand functions are linear (in 4+ dimensions). It is -in ...
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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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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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Do the partial derivatives of the compensated demand have an interpretation?

When obtaining the Marshallian demand from a utility maximization problem we have a classification of normal goods, inferior goods, Giffen-goods, etc.. These are related to the first derivative of the ...
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Adam Smith: If humans are self-interested individuals, why should we reinvest our wealth?

According to Adam Smith, humans are self-interested individuals. If this is true, why does he argue that people should reinvest their wealth? How does this benefit a self-interested individual? Does ...