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12 votes
Accepted

Is an "arms race" between wages and inflation inevitable?

How true is the original assertion? The original assertion is poorly worded and not generally valid even if we ignore the wording. The assertion (at least a corrected version of it) can be true under ...
1muflon1's user avatar
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5 votes

Is an "arms race" between wages and inflation inevitable?

Then a sizeable proportion of employers would need to do this to make a difference. If we take the statement literally that it's talking about just one employer, rather than the effect in general of ...
Acccumulation's user avatar
4 votes

Is an "arms race" between wages and inflation inevitable?

As the 1muflon1 answer states the best argument you are already making is that single employer committing to such policy does not matter. This would not necessarily be true if every employer would try ...
Leeh Mizrahi's user avatar
3 votes
Accepted

Why doesn't it matter, whether you draw Demand and Supply Curves as arcs, or straight lines?

It doesn’t matter if you are just demonstrating some simple concept such as shift of demand or supply curve as in pictures above, because as long as the supply and demand are continuous and at ...
1muflon1's user avatar
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3 votes

What should a producer do in this scenario?

Scarcity has nothing to do with what you ask. To make this interesting, suppose the supplier did not know before hand of the demand curve they would face (because if they did, they would produce less)....
Alecos Papadopoulos's user avatar
3 votes

Should firecrackers which disturb neighbours be a production externality or consumption externality?

You are correct: in the circumstances described the disturbance to neighbours constitutes a negative consumption externality. I have tried to imagine why someone might think the externality is on the ...
Adam Bailey's user avatar
  • 8,369
3 votes

How price is determined in the following monopoly model question?

So far so good for part (a). The basic idea for part (b), is that if the parking lot goes first to set the price first, the store is going to have to allow the costumers to get at least enough ...
Whis's user avatar
  • 31
2 votes

Different methods to calculate price elasticity

For a differentiable function $V(P)$ the elasticity, more precisely the point elasticity, at price $P$ is defined as $\frac{dV}{dP}\frac{P}{V}$. This corresponds to the local rate of change of the ...
VARulle's user avatar
  • 6,825
2 votes

Different methods to calculate price elasticity

Hint: Suppose you use Methodology 1 but take the percentages of the values in $(V,P)_2$ instead of $(V,P)_1$. Then $\%\Delta V= 50\%$ and $\%\Delta P = -28\%$ giving $\epsilon=-1.79\%$. What does ...
Adam Bailey's user avatar
  • 8,369
2 votes

Why does supply (and demand) shift left and right as opposed to up and down?

The supply curve is defined by a function $Q_{S} = a + bP$. When plotting on a price-quantity graph, we have to invert the function: $P = -\frac{a}{b} + \frac{Q_{S}}{b}$. We set $Q_{S}=0$ to get the y-...
Macaulay's user avatar
2 votes
Accepted

Why don't producers of goods with inelastic demand refuse to increase supply?

That's because "farmers" as a collective is not a decision maker. Decisions, e.g. on how much food to burn, are made by individual farmers. Now an individual farmer, by her own decision, has ...
VARulle's user avatar
  • 6,825
2 votes

How does perfect competition work?

I can understand that this can be confusing. A better way to re-state those two statements is: In a competitive environment, No individual firm believes that it can influence the market price. ...
Amit's user avatar
  • 8,476
2 votes

How does perfect competition work?

Answer to 1 The example you provide has only few firms. In perfectly competitive market there are infinite amount of firms so you can't simply use simple table to visualize that since your table lacks ...
1muflon1's user avatar
  • 56.4k
2 votes

How do I correctly incorporate a $3 tax on supply to each unit sold?

You first solve for $P$ in the supply curve. $Q = 3P + 50 \iff 3P = Q - 50$ $\iff P = \frac{Q}{3} - \frac{50}{3}$. Since the producers got taxed, they need to charge a higher price to cover their ...
Nicolas Torres's user avatar
2 votes

Is John Maynard Keynes an economic liberal or an economic nationalist?

May be you can start reading what Keynes thought of himself, regarding that question, in his 1925 essay Am I a Liberal?: I am ready to sacrifice my local patriotisms to an important general purpose. ...
BakerStreet's user avatar
  • 3,747
2 votes

Why would lowering quantity supplied cause to quantity demanded to increase?

Why would reducing the quantity supplied cause the quantity demanded to increase. It doesn't. The quote is confusingly written, I am not even 100% sure it says that demand will increase since the ...
1muflon1's user avatar
  • 56.4k
2 votes

When talking about the supply curve, does a price increase always result in an increase in quantity sold?

It is possible to see an outcome where equilibrium quantity sold decreases and the price increases when the supply curve is upward sloping. Consider an increase in price of input labor from $w_0$ to $...
Amit's user avatar
  • 8,476
2 votes

When talking about the supply curve, does a price increase always result in an increase in quantity sold?

The answer should be false. Law of supply states that quantity supplied increases in price. Quantity supplied $\neq$ quantity sold. For example if we have supply given by: $S= 10 +p$, then if price ...
1muflon1's user avatar
  • 56.4k
2 votes

How does artificial scarcity benefit the seller?

First it is not appropriate to call it scarcity or artificial scarcity, since in economics that term has special technical meaning. Better term would be output/supply restriction. Restricting output ...
1muflon1's user avatar
  • 56.4k
2 votes

Is the supply and demand elasticity equal at the equilibrium?

It is not true that at the equilibrium point the elasticity of demand is equal to the elasticity of supply. This is a coincidence in your particular example, depending on the fact that the slope of ...
BakerStreet's user avatar
  • 3,747
2 votes
Accepted

Individual Consumers Representation on the Demand Curve

I recently watched an educational video titled “Understanding the Demand Curve: Shifts and Consumer Surplus”. In the video, individual consumers were associated with specific points on the demand ...
John Bollinger's user avatar
1 vote
Accepted

why is increasing price not more profitable when the demand is unitary elastic?

The theory says that total revenue remains the same. That is not the same as claiming total profit is same. Total revenue is by definition given as a price times quantity: $R=PQ$. Total profit on the ...
1muflon1's user avatar
  • 56.4k
1 vote

Is the supply and demand elasticity equal at the equilibrium?

supply & demand elasticities are independent of each other and don't depend on the equilibrium.
Rayla Xadia's user avatar
1 vote

If the government subsidizes electric vehicle (EV) purchases , then we can predict a higher price for non-EV vehicles?

A couple of things: In a competitive market, the supply curve of a good is based on the marginal cost of producing that good, so there will be no shift in the supply curve. Think about where the ...
A. Miller's user avatar
  • 151
1 vote

When talking about the supply curve, does a price increase always result in an increase in quantity sold?

This is a trick question, apparently with an educational intent. Supply and Demand curves are curves that reflect intentions, not realized events. Statement A: Supply curves slope upwards is ...
Alecos Papadopoulos's user avatar
1 vote

Inequality and effect on pricing

The prices will only start adjusting once the new millionaire starts spending some money. If he is washed ashore without his credit card or cash then even if he has millions somewhere else it will ...
1muflon1's user avatar
  • 56.4k
1 vote

tax imposition on supply and demand curve

If you have taxes, it is important to distinguish between the price that consumers pay $p_D$ and the price that producers receive $p_S$. Assume that the demand curve and the supply curve are linear, ...
tdm's user avatar
  • 12k
1 vote
Accepted

tax imposition on supply and demand curve

Let $p_d$ be the consumer price and let $p_s$ be the producer price. If there is a specific tax $t$ on consumption, then a consumer pays $t$ on top of the producer price $p_s$, so that $p_d=p_s+t$. ...
smcc's user avatar
  • 659
1 vote

How do free goods change the equilibrium price?

Response to original question It depends on parameters that you assume there might be no effect or some effect. Market price is given such that $S(p)=D(p)$, supplying 3 extra units of good for free to ...
1muflon1's user avatar
  • 56.4k
1 vote
Accepted

About the basics in marginal benefit

My lecturer said that it is also the maximum willingness to pay for an extra unit of good. Why so? This comes just from the definition. E.g. if my marginal benefit of one extra bottle of milk is 2e I ...
1muflon1's user avatar
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