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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53 views

Is there a term to refer to the point at which an actor updates a "price"?

Examples of what I mean: A company increases the price of their product to match increasing COGS (e.g. a restaurant increasing their prices because the cost of ingredients has increased significantly)...
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Can the Law of supply and demand be derived from the Subjective Theory of Value using Agent-based modeling? [closed]

I was tinking about the Law of Supply and Demand and Subjective Theory of Value and I have the intuition that the first can be derived from the second using agent-based modeling. Is this true? Also I ...
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Why are the gas prices so high in the US and why does it depend on OPEC+?

I've been reading these days a lot of discussions between people on the internet concerning the hikes in gas prices. I then read many articles about this, and the opinions are really different, and ...
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Price Response Function vs Willingness to Pay vs Price Response Function

I'm confused on three different economics terms and seek clarification. The terms are "Demand Curve, "Price Response Function", and "Willingness to Pay". I had thought that ...
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What is the economic interpretation of $ \partial q / \partial p = - (1/p^2) w^T (D_w x) w $ in profit maximization?

Consider a profit maximizing firm that is perfectly competitive in both input and output markets. It takes $n$ inputs $ x \in \mathbb{R}^n_+ $ and produces $f(x)$ units of output, where $ f: \mathbb{R}...
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Show that the long-run supply curve of an increasing cost industry in perfect competition is upward sloping

Many intermediate microeconomics textbooks teach us that in perfect competition, the long-run supply curve of an increasing cost industry is upward-sloping. However, They usually give some hand-waving ...
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Why is Deadweight Loss Bad for Society?

I have learned that in a perfectly competitive market in the absence of externalities, taxes will impose a deadweight loss upon society, due to reduced market participation by consumers and producers. ...
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Deriving the inverse demand curve

I have been given the following information about a product and I am trying to find the inverse demand curve (with the assumption that the demand curve is linear). Annual sales: \$2 million Price per ...
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Can an increase in demand indirectly lead to a decrease in average price due to economies of scale?

Let's say firm A produces a very niche product, that requires them to handcraft each product, and because of extremely expensive and skilled labor the production costs are extremely high. Firm A has a ...
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Are there any economic reasons why luxury goods should not be auctioned off, or at least dynamically priced, when facing shortages?

Over the last year many prominent examples come to mind, where there does not seem to be any limiting moral or ethical reasons, and are simply not available most of the time due to demand greatly ...
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Why do the BEA's Use and Supply Tables have Industries (and not products) on the Rows?

I'm learning about Use and Supply tables, and all the tutorials (including this very nice video from the Singapore Department of Statistics) show that products are on the rows and industries are on ...
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Why could a CO2 producer in the UK not just increase its price to match input price increases?

I'm confused about this UK story of the need for government intervention to "bail out" a CO2 producer: The UK government has agreed to subsidize a major US fertilizer manufacturer at a cost ...
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Is There Literature on Individual Demand Cap (in Housing Market)?

Some (obv. very left) politicians in germany propose to impose that owning housing should be capped at what a person does use him/herself. That is, you should not be allowed to own housing for ...
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Does the supply curve always slope up?

I was working through a thought experiment which appears to violate the Law of Supply (i.e., that supply curves are non-decreasing). Suppose that a worker is paid by the hour and, given his hourly ...
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What were the historical theories of price formation before demand-supply relationship was well understood?

Markets have existed for thousands of years. People must had ideas about where prices came from. Before the clear formulation of demand/supply-based theory of prices, what were the historical theories ...
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Why supply is more elastic at lower prices and more inelastic at higher prices?

In my economics book*, in the lesson explaining what price elasticity of supply is, it's written: In reality, supply curves are likely to be non-linear, so will have a different PES value at ...
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Why do supply curves that start at the origin have a PES value of 1?

In my economics book*, in the lesson explaining what price elasticity of supply is, it's written: Any supply curve that starts at the origin has a PES value equal to 1. The theoretical outcome means ...
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Demand as a function of supply and storage

I'm trying to model a situation where demand is a function of the supply of medical equipments. The equipment costs are already covered, hence price is not taken into consideration. The supply however ...
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How to show consumer subsidy (rebate) on supply and demand diagram?

I am currently working on an assignment and needed some help. My assignment requires me to find an article relating to a form of government intervention such as taxes or subsidies and analyse the ...
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What causes inflation?

Given the recent increases in the price of many things in the US (lumber, used cars, gasoline, etc…) I have begun thinking about what is going on at a macroeconomic level. My first thought is “it’s ...
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What determines the price of a stock other than supply and demand?

It is said that supply and demand determine the price of stocks but there must be other factors. For example when a company is about to expand the price will usually go up. Why? (The answer that it is ...
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Why do firms reduce both price and supply during a recession?

Could anyone explain why firms reduce both price and supply of goods and services during a recession with a practical real life example for better understanding ?
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If companies could reduce prices to bring up demand during a recession, then why there is less production/output and more unemployment

When consumer demand reduces, and if companies could reduce prices to bring up demand during a recession, then why there is less production/output and more unemployment during a recession?
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Fall in price of sugar affects price and quantity of candy [closed]

Using the supply and demand model, explain and illustrate how the price and quantity of candy would be affected by sugar prices dropping, starting from the equilibrium point. Am I right in stating ...
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Effect of import quota on NCO, NX

I'm studying loanable funds from the book "Brief Principles of Macroeconomics, 6th ed". On page 307, the effects of an import quota are explained below. It said the net export rises, but NCO ...
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I think hot weather alters firms' desire to sell at some given price because hot weather increases the demand for ice cream. (Mankiw's book)

I am reading "Principles of Economics" by N. Gregory Mankiw. I think hot weather alters firms' desire to sell at some given price because hot weather increases the demand for ice cream. Am I ...
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Why doesn't the supply curve shift to the left in the following situation? Why do producers respond to the surplus by cutting their prices?

I am reading "Principles of Economics" by N. Gregory Mankiw. Why doesn't the supply curve shift to the left in the following situation? Why do producers respond to the surplus by cutting ...
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Demand for minimum of $4$ different goods

The consumer has the utility function with $4$ goods $$U=\min\left \{ \sqrt{x+y},z+w \right \}$$ The prices are $p=(3,2,2,1)$ with wage $m=1$. Find the demand. So far I have observed that it is ...
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Unsolveable Demand/Utility Problem?

A consume has a preference relation on $\mathbb{R}^4_+$ with a utility function defined as $$ U(x_1,x_2,x_3)=(\ln(3x_1+2x_2+x_3))^3$$ Find the demand at prices $p=(1,1,1)$ and wage $4$. Attempt I ...
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Derive demand function from utility [closed]

Never encountered such a problem as I am new. $$U(x_1,x_2)=(a\ln(x_1)+b\ln(x_2))^n$$ and $a,b,n>0$ with income $w>0$ and prices $p_1,p_2>0$. Find the demand function. Attempt I am thinking ...
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Derive the market demand function and market supply function

In the second page of this paper Gjerstad et al derive the market demand and the supply for assets using the data shown in Table 1. The table is The demand function they find is $Q = 94 – 0.4 P$ and ...
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How has the Chinese freight industry developed during last year?

The last year has been filled with so many unfamiliar circumstances such as Covid-19, and now with the rising tensions as well, I'm wondering how the Chinese freight industry is developing during ...
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Why are constant price elasticities reported?

Price elasticity of demand $\mathrm{e_{D,P} = \dfrac{dD}{dP}. \dfrac{P}{Q^*}}$ clearly depends on the levels of price and quantity. Then why is everywhere (research papers, textbooks etc.) a constant ...
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Classical Theory of Inflation - Money Supply, Money Demand and Prices

In every textbook, website I read when talking about the classical theory of inflation, I see the diagram below which depicts the value of money, prices etc. This one below is from Spark notes (https:...
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95 views

How does "buy low, sell high" relate to supply and demand?

I'm taking introductory microeconomics, and I'm trying to consolidate my understanding by looking at some real world examples. In a perfectly competitive market, there are many consumers and suppliers ...
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85 views

Non monotonic supply curve

Supply curves are usually non decreasing. For example in a electricity market, providing more capacity means turning on new production units with higher costs, see e.g. the following representation: ...
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80 views

Constant marginal cost for a firm and perfect competition

What happens if the demand curve is flat because the firm is a price-taker in the market, but the firm has a constant marginal cost. If the equations are the same I assume the price would be set with ...
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What is the producer surplus given the price the consumer paid + price they are willing to pay, and the marginal cost of producing the product?

Linda is willing to pay $6 for a cereal box. Linda bought a cereal box for $4. The marginal cost of producing that cereal box ...
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Deriving aggregate output from labor demand and supply

I was reading the following paper: http://eml.berkeley.edu//~moretti/growth.pdf I got stuck at equation (7) The firm's production function is $Y_{i}=A_{i}L_{i}^{\alpha}K_{i}^{\eta}T_{i}^{1-\alpha-\eta}...
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Why there is no supply on monopoly markets?

We learned in the class that monopoly markets do not have supply curve. Our textbook (Microeconomics and Behavior, page 388 from, R. Frank) says: A monopolist has no supply curve and it explains it ...
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How did the Price/Value of any goods measure in money determined in the first place

Nowadays most value/price of goods and services are determined by the supply and demand in the market. And most of the time we use money which back by the credit/trust of the country to exchange these ...
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Market shares of Nested Logit demand model

Consider a Nested Logit demand model with two nests, $N_1, N_2$: $N_1$ contains the outside option only (labelled "0"), $N_2$ contains all the remaining alternatives (labelled "$j=1,...,...
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Simple supply and demand problem

I'm not sure about this, can I ask you if I'm wrong? Thanks. Data: $$Q_{s}=P/2$$ $$Q_{d}=P-42$$ Questions: a) How many units will be traded at 35 dollars? At $14 dollars? b) What quantity at what ...
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Problem with the discrete demand curve

I am starting to learn microeconomics from a book named Intermediate Microeconomics by Hal R. Varian. The first chapter is on market. I was attempting to solve the end text problems but was stuck. ...
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42 views

Marginal Utility Meaning [closed]

I'm revisiting some old topics from introductory economics and I am not quite sure I have convinced myself of the theory behind marginal utility. I have a few simple questions if anyone could please ...
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Understanding Vernon Smith's 1962 "An Experimental Study of Competitive Market Behavior"

Vernon Smith's 1962 paper "An Experimental Study of Competitive Market Behavior" simulates a market using students (who have piece of paper giving their reservation prices). In one of the ...
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Demand and Supply Curve Shifts

I Study economics independently at Marginal Revolution University. But I am stuck with few of the very first Concepts. Those are: Demand and Supply curve Shifts in Isolation. Demand Curve Shifts: When ...
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Is there a mathematical relationship between availability of land and real estate prices?

I’ve seen politicians, activists, think tanks etc proposing a (kind of) land value/property tax for ending speculative land hoarding. They say that builders hoard land and create artificial scarcity ...
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First order condition of log functions in general and interpretation

In the following, a first order condition for a log function is calculated. I know how the left part was calculated, however, I am a little bit confused where the gamma on the right site comes from ...
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271 views

Graphics card shortage - why don't they just raise prices?

See e.g. Nvidia CEO: GeForce RTX 3080 and 3090 Shortages To Last Until 2021 (Tom's Hardware, 2020-10-05) The great graphics card shortage of 2020 (and 2021) (BBC, 2021-01-24) Why don't Nvidia and ...

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