Hot answers tagged

5

Equilibria: in the macroeconomic sense of aggregate equilibrium where all markets clear, markets are most likely never in any equilibrium but rather in constant flux between different equilibria, because the market clearing macroeconomic equilibrium always depends on real and also in short run nominal factors which constantly change. Hence it does not make ...


5

The Brent price is for oil physically delivered in the UK. The price that went negative if for oil delivered in West Texas, US. The physical and economic conditions at the two places are different - volume available, flexibility of that volume, demand, storage, and so on. This leads to different prices.


4

A homebody is someone who doesn't leave their house much. The "homebody economy" refers to economic activities that do or do not do well when people tend to stay at home, which is exactly what is occurring now with the coronavirus pandemic. Things like online shopping, media streaming services, or cook-at-home meal programs tend to do well when ...


4

Provided that increasing returns to scale apply over the whole production function of the company it is likely that it would become natural monopoly. For example, Mankiw in Principles of Economics (pp 292) in some passages even defines monopolies in relation to their cost function: When a firm’s average-total-cost curve continually declines, the firm has ...


3

Depends what exactly is the authors definition of “radical markets”. A predominant consensus in the economic field is that a mixed economy which relies predominantly on market form of organization but also has government stepping in correcting major market failures and some macroeconomic management is economic system that delivers the greatest amount of ...


3

Gode and Sunder (1993) recorded a result similar to yours. The abstract of the paper reads: We report market experiments in which human traders are replaced by "zero-intelligence" programs that submit random bids and offers. Imposing a budget constraint (i.e., not permitting traders to sell below their costs or buy above their values) is ...


3

I suspect that the reason for that result is the way how you modeled the situation is by having the prices to be offered at random from a sample of numbers in uniform fashion (unless I am misreading the code) but this is unrealistic. As mentioned in the paper Smith's 1962: each sequence of experiments was conducted over sequences five to ten minutes long ...


3

In narrow sense of the word the article was definitely peer reviewed as it was published in Journal of Legal Analysis. But in this narrow sense it was most likely peer reviewed by jurists not economists. In a broader sense of the word there are economists who had a look at the claims as well. For example, review of their book by Levine (2020) in Journal of ...


3

Besides the great answers already given, adding my two cents: A firm ends up being a sole player in the sector when market entry for others is restricted, which may not be guaranteed by IRTS or even continual economies of scale. First, it is important to realize that, contrary to our first naive intuition, IRTS does not imply economies if scale. See this for ...


3

It can be shown that a firm with increasing returns to scale (IRTS) and no market power makes a negative profit (and may not be observed at all, in the long run). Conclusion: either subsidies, or market power is necessary for a firm with global IRTS to be sustainable. With usual notations, the claim follows from the first order condition for an (inner) ...


2

The equilibrium network is smaller than that chosen by a social planner because agents do not internalize network externalities. Vaccination against a contagious disease is a standard such example. Someone who is not vaccinated exposes others to potential infection and prevents others from, say, using public facilities. This is a negative externality for ...


2

This is one possible interpretation. Good 2 being removed from the market can simply be interpreted as $x_2 = 0$. In an economic interpretation the good does not simply disappear from the utility function in the sense that preferences do not change, it is just the availability of the good that changes. This is an external condition, so you can simply think ...


2

Since there is no change in consumer preferences, the demand function will not change. The firms supplying skateboards face increased costs due to the wheels being more expensive. This will alter their supply function and thus the equilibrium price in the skateboard market may change, and hence the equilibrium quantity demanded may also change.


2

Natural monopolies may exist because the cost structure is such that the market could not sustain two firms. This is usually explained by large sunk costs and relatively small demand - if there were two firms the average cost for at least one would have to be above the equilibrium price. If there are no sunk costs at all - as set forth in the ideal case of a ...


2

There are economists who argue that market for organs would be efficient and would improve the allocation of cadavers saving lives. There also good arguments for them leading to Pareto improvements although you should note that market does not necessary have to be strictly pareto-optimal for it to be desirable. Often in public economics it is enough to show ...


2

Economists already consider South Korea to be developed economy. In fact some scholars already argued that Korea was a developed economy already sometime in late 90s - 2000s (see Kim, 1988; Kim, 2011). Opinions might differ because there is no precise definition of what developed country is but quite often in literature this is proxied with whether economy ...


2

First there are some inaccuracies in your question. The central bank often goes to buy financial instruments that are riskier than government bonds (such as corporate bonds)- which is called "quantitative easing". This is simply not true large part of QE program consists of buying government bonds (treasury securities). Private bonds or other ...


1

The standard definition of market capitalisation is: Market capitalisation = (number of units in existence)*(price). Update: VARulle gave a link to the definition they use for “circulating supply”: “The best approximation of the number of coins that are circulating in the market and in the general public’s hands.” They need to eliminate “burned” (destroyed?) ...


1

Lets first try to understand what it means: when a demand / supply curves touch the axes. The point where the demand curve touches the Y-axis (Price-axis) can be interpreted as the price which makes the first consumer willing to pay for that good (prohibitive price). The point where the demand curve touches the X-axis (Quantity-axis) can be interpreted as ...


1

Broadly, the answer to your question is it depends on the context. Generally, if you have some sort of functional form for the curves, you can tell whether they touch the axes by seeing if there is an intercept on either the P or Q axis (set P = 0 to see if there is a Q-intercept, and vice versa). So, for example, if you're working on a monopoly problem that ...


1

this was answer to the original question before user completely edited it to something else You are asking several different questions: Do barriers to entry increase the (collective) market power of incumbent suppliers? Not generally. For example, in Bertrand price competition firms will have no market power even if there are barriers to entry. Even ...


1

No its not necessary long run phenomenon it can hold in short run as well. Rather what matters is how competitive markets are and whether there are any market failures such as externalities etc. To be even more specific under the first theorem of welfare economics if markets are competitive, complete, information is symmetric, there are no externalities and ...


1

I think this is a typo in the paper. As far as I see, the houses $\{h_5, h_6, h_7\}$ are not occupied, so it should be that $H_V = \{h_5, h_6, h_7\}$.


1

Capping prices at a low level permanently would presumably lower supply in the long term, but that is not germane to this question. I will attack a slightly narrower version of this question: does capping prices in an emergency lower investment? I would argue that the definition of “emergency” means that it is short term, and activity is disrupted. It is ...


1

There are various important social benefits of commodity trading even just on paper. The main ones are risk management, hedging, providing liquidity and secondary market, and price discovery. For example, both producers and customers of commodities can use future market to hedge risks of adverse price movement. For example, in market for potatoes the ...


1

One price relative to others The key parts of the statement "When a price rises, buyers of that good must pay more, but sellers get more revenue when they sell it. The loss in buyers' purchasing power is matched by the rise in sellers' purchasing power." are "a price" and "that good". If the price of oranges increases from \$1 ...


Only top voted, non community-wiki answers of a minimum length are eligible