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12 votes
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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

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
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3 votes
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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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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
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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

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
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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
  • 57.2k
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
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2 votes
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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
2 votes
Accepted

Do multiple equilibrium points make sense?

Nonlinearity per se is not an issue. As long as demand is decreasing and supply is increasing in price, there will be at most one equilibrium point. However, if e.g. supply is "backwards bending&...
VARulle's user avatar
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1 vote

Declining housing prices led to decrease in demand?

Blanchard et al are not talking about housing demand but aggregate demand. That is clear from the context of the chapter. The sections 6.1-6.4 of chapter 6 examine how financial markets can affect ...
1muflon1's user avatar
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1 vote

Individual Consumers Representation on the Demand Curve

If the market price of oil is 20 dollars, then a person willing to pay 55 dollars values oil more than the (rest of the) market, i.e. more than (some) other people. If the price were 55 dollars, there ...
Pavel Filip's user avatar
1 vote

Individual Consumers Representation on the Demand Curve

You have to look at the 'marginal'/small changes in the demand function. At some price, e.g. 1 billion dollars, you have a demand of zero. Then you keep decreasing this price until demand jumps to one....
Giskard's user avatar
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1 vote
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Supply curve of what?

Is there a supply curve for each product? Yes. If so, it is strange that the supply curve is monotonically increasing. I would expect higher prices to be sold in smaller quantities and lower prices ...
Giskard's user avatar
  • 29.4k
1 vote

Why don't prices for hotel rooms rise to fully match demand?

Hotels already do dynamic pricing where they charge more/less depending on what the demand is. Research shows that already virtually all hotels (about 90% in Europe according to estimates of Abrate ...
1muflon1's user avatar
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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
  • 57.2k
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
  • 57.2k
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
  • 12.5k
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
  • 701
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
  • 57.2k
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
  • 57.2k
1 vote

Current House Demand and Supply

Considering basic supply and demand theory, as demand increases prices rise from competition; there is less to go around per person. The demand drives up the prices not the other way around. ...
Gwendolyn Anderson's user avatar

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