31 votes
Accepted

How can power/electricity prices be negative?

Yes, customers who were exposed to day-ahead wholesale market prices were paid to use electricity. It is a combination of several different factors that make the day-ahead wholesale electricity ...
user avatar
  • 8,002
26 votes
Accepted

Why do wages not equalize across space?

There are several explanations for this in the literature (the order does not necessarily reflect importance of each explanation). Different Price Levels: Non-trivial portion of the wage differential ...
user avatar
  • 42.1k
21 votes

Why do wages not equalize across space?

I would add two more, and rather primitive, factors in @1muflon1 long list: Labor input is not perfectly mobile with respect to the wage. We should never forget that the concept of a utility function ...
user avatar
18 votes

How does Black Friday work?

Gary Becker's work on Social Demand probably has something to do with the phenonmena. Becker basically asked why some popular places consistently seemed to underprice their goods. For example, ...
user avatar
  • 6,409
17 votes

Why would a company sabotage its product's ability to be used for a particular purpose?

Limiting the hash rate is maximizing the demand for their product. Historically, gamers have been crucial to Nvidia's success. Their demands drive innovation, and they're the ones willing to spend ...
user avatar
  • 289
15 votes
Accepted

What do supply-demand curves really look like?

You sometimes find textbooks drawing the supply and demand curves as concave upwards, as such: The straight-line supply and demand curves can be thought of as a magnification of this graph, where the ...
user avatar
  • 1,200
14 votes

The supply and demand of Virtual Products

The book Information Rules by Google Chief Economist Hal Varian (with Carl Shapiro) deals with many issues raised by the particular features of the digital economy. In general, he finds you don't need ...
user avatar
  • 15.8k
13 votes

In microeconomics : is this the contradiction in the atomicity of firms ?

A price-taking firm takes prices as given, but that does not mean that the firm cannot influence prices; it just means that the firm ignores its own impact on prices. Now the question is how sensible ...
user avatar
13 votes

Is the market price objective?

The market price is the current price at which something may be bought or sold. If a good is not sold or bought at a particular price, then that is not the market price. Whether or not any particular ...
user avatar
12 votes
Accepted

Why would a company sabotage its product's ability to be used for a particular purpose?

This topic is explained by market segmentation with price discrimination in monopolies. This is widely used in, for example, price discounts for senior/retired people. By targetting different market ...
user avatar
11 votes
Accepted

How does Black Friday work?

Though the Black Friday savings do exist, they are less significant than in some of the early years when the "Black Friday" sales were just starting to get really popular. Raising prices is one way ...
user avatar
  • 226
10 votes

What are Giffen Goods?

Consider the Slutsky equation, $$ \frac{\partial x}{\partial p} = \frac{\partial x^c}{\partial p} - \frac{\partial x}{\partial I} x. $$ A giffen good is the case where the income effect $\frac{\...
user avatar
  • 9,127
10 votes

How does Black Friday work?

Black Friday is a marketing event that benefits from network effect . The more stores offer products for lower price and the more consumers know about them, the greater is the network effect. ...
user avatar
10 votes

Why does quantity supplied increase with price in economics?

I believe that I have found the problem in this line: I don't understand why price has to increase if quantity increases. The concept is actually the other way around. Think of it in the same ...
user avatar
10 votes
Accepted

Explaining why Hicksian demand is more inelastic to intermediate micro student

Here's a "no maths" explanation (including the inferior goods case, because I think it helps to understand what's going on): Suppose we have a normal good, $x$, and we increase its price. Marshallian ...
user avatar
  • 16.6k
9 votes

What are Giffen Goods?

There is rather low probability for demand of a good to exhibit the Giffen property at market level, where averaging over heterogeneous preferences, different income levels and consequent ...
user avatar
9 votes

Effects of Eliminating Government Controls on Supply (organ donation)

The Iranian organ market It might be worth looking into the organ market in Iran. Unlike in other countries, it is legal to sell your kidney to patients who need a new one. The process is regulated ...
user avatar
9 votes

Is the market price objective?

The vast majority of economists subscribe today to the subjective theory of value that was in economics introduced by Jevons, Walras, and Menger. Subjective theory of value posits that value is ...
user avatar
  • 42.1k
8 votes
Accepted

Usage of natural gas in 1970 (where was the demand elasticity?)

tl;dr: it's basic engineering: efficiencies improved between 1970 and 2010. Additionally, net USA imports increased from 0.75 trillion cubic feet in 1970 to 3.8 trillion cubic feet in 2007 I think ...
user avatar
  • 8,002
8 votes
Accepted

Demand curve from logit model

We cannot obtain "demand" in the usual sense, because demand is a random variable. The "best" we can do is first, to obtain the Conditional Expectation of individual demand (conditional on the ...
user avatar
8 votes

How does Black Friday work?

In a sense, I think the right question is not "why do firms offer a discount" (or, as you put it, why do smart firms not "react by increasing all of their prices in response to demand?") Rather, the ...
user avatar
  • 16.6k
8 votes
Accepted

How do we prevent big companies conspiracy?

The kinds of practices you describe are frequently controlled through competition/antitrust policy. For example: In the US conspiratorial agreements (such as price-fixing cartels, bidding cartels, or ...
user avatar
  • 16.6k
8 votes
Accepted

Why does quantity supplied increase with price in economics?

Not all (current and potential) production has the same costs. Some production has very low additional cost: maybe all the factories and workforce are already in place, they're close to where the ...
user avatar
  • 8,002
8 votes
Accepted

Are there any instances where short run demand/supply is more elastic than long run cases?

It is possible. We normally think demand and supply are more elastic in the long run because consumers/firms have more options in the long run. For example if gas becomes more expensive consumers ...
user avatar
8 votes

The supply and demand of Virtual Products

Your broad idea is right. Since the marginal cost of reproducing digital goods is essentially zero, there is a sense in which is appears optimal to give the good to any consumer who has a positive ...
user avatar
  • 16.6k
8 votes

Why can't the Land-Value Tax (in some cases) be passed on to tenants?

Because the supply of land is essentially fixed, land rents depend on what tenants are prepared to pay, That doesn't make any sense. If more people want to live in a particular place, rents ...
user avatar
  • 1,152
8 votes

Why doesn't Nintendo fire up the old factories and re-produce *exact* copies of many of their most popular games, controllers and consoles?

I am unsure whether this qualifies as economics, but it would be something that might be discussed in business school. Furthermore, the answer is almost entirely engineering. As such, I will do this ...
user avatar
8 votes

Why land supply is inelastic?

The claim is that this curve should be a vertical line because no more land can be produced. However, as far as I understand, the supply curve represents the quantity of a product that sellers are ...
user avatar
  • 42.1k
8 votes

Why would a company sabotage its product's ability to be used for a particular purpose?

Disclaimer: I am not at all familiar with the hardware industry; in fact I believe this answer makes most of my points but is better tailored for the specific industry in question. Market share A ...
user avatar
  • 26.2k
7 votes
Accepted

What is the advantage and disadvantage to have a high value of USD for USA?

When the USD is highly valued, it allows people from the home country, the United States in this case, to purchase goods relatively cheaply from abroad and put pressure on domestic firms to have low ...
user avatar

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