Talk:Supply and demand/Archive 3

Archive 1

Archive 2

Archive 3

Incorrect

"An increase in the quantity produced or supplied will typically result in a reduction in price and vice-versa."

This description of a negative sloping supply curve appears in the introduction of this article adjacent to a diagram that clearly shows a positive sloping supply curve.

Anybody care to explain?

David Kendall (talk) 21:29, 1 August 2009 (UTC)

I agree the language mistakes changes in supply and changes in quantity supplied a fundamental distinction in comparative statics. —Preceding unsigned comment added by Jgard5000 (talk • contribs) 20:49, 11 August 2009 (UTC)

In answer to Kendall's question, that's what vice-versa means. The reverse is true, ie, "A reduction in the quantity produced or supplied will typically result in a increase in price." According to the theory, anyway. Until that becomes inconvenient, at which time someone moves the goalposts?..as did perhaps the original thinker who devised the instruction that Jgard and Cretog08 doubtless received when they were educated on the subject. We may never know what pearls of wisdom lie therein, but I would like to take a stab at finding out. So...

Cretog08 removed the following from the lede, (with the summary, "rm incorrect bit about increasing quantity supplied, and following material):

An increase in the quantity produced or supplied will typically result in a reduction in price and vice-versa. Similarly, an increase in the number of workers tends to result in lower wages and vice-versa.

It is not clear from the article that this is not true, nor, sad to say, is it clear from Jgard's reply, in what way it is not true. If it is the fundamental misunderstanding of non-economists that this is so, and given WP:JARGON, then it would follow that an explanation of why this is not so would be required of this article. Anarchangel (talk) 01:58, 23 September 2009 (UTC)

"An increase in the quantity produced or supplied will typically result in a reduction in price and vice-versa.": This is generally false, most often an increase in the quantity supplied goes along with an increase in prices. It really depends on why the quantity supplied is increasing, but it's certainly incomplete and misleading. As far as jargon goes, we try to make the distinction between an increase in Supply-which means an increase in quantity supplied at all prices and so a shift in the supply curve, versus an increase in the quantity supplied which most often means a shift along a single supply curve. A shift along a typical up-sloping supply curve gives an increase in price.

"Similarly, an increase in the number of workers tends to result in lower wages and vice-versa": This is partially true-an increase in the number of workers generally means a shift in the supply curve, and the new equilibrium would be at a lower price. I removed it because having removed the previous line, it didn't make any sense. Also, I don't know what to make of the "vice-versa" here. It certainly isn't true that lower wages increase the number of workers... CRETOG8(t/c) 02:38, 23 September 2009 (UTC)

Supply is the quantity of goods a producer is willing and able to supply under the prevailing circumstances. One circumstance is the price. There are many other circumstances that can affect this decision - price of inputs, technology, prices of related goods, government policieis being a few - the supply curve is a two dimensional depiction of the relationship. Since we have only two dimensions the line only shows the relationship between two of the many variables - price and quantity supplied - the rest of the variables that can affect supply are being held constant that is they are reflected in the constant term - the intersection of the curve and the y axis. If one of these variables changes the constant term will change meaning the curve will shift up or down along the y axis - it is this shift that is called a change in supply - it is a change in supply because the shifted curve is a new supply function.--Jgard5000 (talk) 12:59, 24 September 2009 (UTC)jgard5000

Shifts

The diagrams are slightly confusing as to the "direction" of a shift in the demand or supply curve. The proper nomenclature is "in" and "out'. As noted in the article a shift is due to a change in a non-price determinant of demand or supply. The movement is due to the change in the x-intercept. All non-specified determinants of demand or supply are "bound-up" in the x=intercept. —Preceding unsigned comment added by Jgard5000 (talk • contribs) 20:45, 17 May 2009 (UTC)

I don't think there is a specific "proper" way to talk about shifts. "In" and "out" makes sense when talking about the pictures, "up" and "down" is more meaningful when talking about increases or decreases. If you think "in" and "out" is more helpful for a place in the article, then using those terms is fine, with explanation, but don't describe that as the proper way to talk about it. CRETOG8(t/c) 11:49, 21 September 2009 (UTC)

Maybe "proper" is the wrong word - possibly left and right would be better - up and down can create confusion - a decrease is supply would be reflected in a upward shift in the supply curve - since as i sincerely believe the shift is due to changes in the x intercept in and out remain my top candidates - in the spirit of raiding physics for terms and concepts we could adopt red and blue shift--Jgard5000 (talk) 04:55, 23 September 2009 (UTC)jgard5000

I'm OK with using any of the terms (well, not red and blue), so long as it reads clearly, and certain terms aren't tagged as the "proper" ones. "Up" and "Down" should be used somewhat in the prose, because that's really what's happening, but I agree it can be confusing to talk about supply shifting "up" when it looks like the curve moves down. CRETOG8(t/c) 05:00, 23 September 2009 (UTC)

I realized that the supply curve shift because of change in the y intercept so up and down are correct but still confusing.--Jgard5000 (talk) 18:12, 25 September 2009 (UTC)jgard5000

S↑CURVE↓Q↑P↓

S↓CURVE↑Q↓P↑

D↑CURVE➙Q↑P↑

D↓CURVE←Q↓P↓ --Jgard5000 (talk) 18:39, 28 September 2009 (UTC)Jgard5000

shape of demand

There's some material here questioning whether demand curves should generally slope down, or what their shape should be in general. I propose to deal with this in two ways:

1. Most material arguing about whether a market demand curve is likely to have a non-standard shape should be left in the Demand curve article, rather than here. (discussion)
2. But if there's specific alternative shapes which have implications in the model of supply & demand, then those can be described here, in the full model, rather than on their own. Those implications

should come from WP:RS or course, and not be WP:OR. CRETOG8(t/c) 03:30, 23 September 2009 (UTC)

when you question the shape of the aggregate consumer demand curve but you are limited to WP>RS is there not a bias created in favor of tradtional theory?--Jgard5000 (talk) 01:13, 29 September 2009 (UTC)jgard5000

In a sense, yes. It's a trick balancing WP:RS and WP:UNDUE with WP:NPOV generally, but that's the goal. Material should be presented in reasonable proportion to its coverage in reliable sources, but ideally still in a neutral tone so as not to give approval. CRETOG8(t/c) 01:49, 29 September 2009 (UTC)

if one person has all the supply......

what difference does it make what the demand is? you can sell it for whatever you want with noone to keep you in check. 199.117.69.8 (talk) 19:25, 5 May 2009 (UTC)

It takes two to tango - try to sell a hot dog for 105.00$ there may be circumstances under which the good would command the price but they are few and far between ---Jgard5000 (talk) 00:15, 30 September 2009 (UTC)jgard5000

A Weasal Responds

"Some" schools of economics, etc. In microeconomics, the principle of supply and demand is likely the most undisputed theory there is. I have never heard of, or read a paper that disputed this. I think the first paragraph gives a misleading perception that there is a dispute over it (in MICROECONOMICS). There are genuine disputes over the principles of supply and demand. Rather than restating the argument and possibly botching it let me quote the substance of the argument as it appeared in an article entitled A 75th Anniversary Present for Sraffa by Steve Keen (UWS), John Legge (La Trobe) and Geoff Fishburn (UNSW):

Sraffa's critique

The gist of Sraffa's critique was that two key precepts to supply and demand theory are mutually contradictory. The model of a single commodity market in the short run requires that supply and demand curves are independent, and that supply is constrained by a fixed resource. Given these two conditions, independent supply and demand curves can be drawn in which the slope of the demand curve is negative with respect to quantity, and the slope of the supply curve positive (Figure 1).

Figure 1: Supply and demand analysis

However, Sraffa argued that these two precepts are mutually inconsistent: in circumstances where the former applies, the latter will not, and vice versa. The assumption of independence will be invalid if a broad definition of a market is used—say, defining the commodity as 'agriculture', and the factors of production as 'land' and 'labour'. In this case, production of agriculture will undoubtedly be subject to diminishing returns, since the amount of the fixed resource (land) devoted to agriculture can only be increased with difficulty.  However, since agriculture employs a large percentage of the factors 'land' and 'labour', its increasing demand for the variable factor 'labour' will alter the demand for 'labour' on an economy-wide scale, with resultant effects upon income distribution and demand for agriculture (and other equally broadly defined 'products'). The movement from one point on a supply curve for 'agriculture' to another will thererfore alter the conditions of demand, requiring a separate demand curve. The idea of a unique equilibrium price is therefore unsustainable.

Untenable

Sraffa put the argument the following way:

“If in the production of a particular commodity a considerable part of a factor is employed, the total amount of which is fixed or can be increased only at a more than proportional cost, a small increase in the production of the commodity will necessitate a more intense utilisation of that factor, and this will affect in the same manner the cost of the commodity in question and the cost of the other commodities into the production of which that factor enters; and since commodities into the production of which a common special factor enters are frequently, to a certain extent, substitutes for one another ... the modification in their price will not be without appreciable effects upon demand in the industry concerned.” (Sraffa 1926) Graphically, Sraffa’s argument is that, rather than the traditional picture shown in Figure 1, the situation will be as illustrated by Figure 2. In this case, the analysis of a single market in isolation from others is meaningless. Clearly, a narrow definition of industry should be used.

Figure 2: Multiple equilibria with a broad definition of industry

However, if we use a narrow definition, then Sraffa argued that the concept of a fixed resource becomes questionable. Each industry will use such a small quantity of the allegedly fixed resource that, in general, extra units of it are easily acquired by either bringing fallow resources into use, or by converting resources from one related usage to another. As Sraffa put it, “If we next take an industry which employs only a small part of the 'constant factor' (which appears more appropriate for the study of the particular equilibrium of a single industry), we find that a (small) increase in its production is generally met much more by drawing 'marginal doses' of the constant factor from other industries than by intensifying its own utilisation of it; thus the increase in cost will be practically negligible…” (Sraffa 1926)

The logical import of Sraffa’s argument was that, if it can be drawn at all, the short run supply curve for an individual market should be horizontal (or even downward-sloping), which would return economics to the classical analysis of price determination. Rather than the Marshallian vision of price being set by the scissors of supply and demand, supply sets (short-run price), while demand determines the quantity sold at that price, as in Figure 3. If Sraffa was right, then the neoclassical theory of the firm, and especially the model of perfect competition, was untenable.

Figure 3: Constant returns with a narrow definition of industry

http://www.debunkingeconomics.com/Maths/Present_for_Sraffa.htm

Who is Piero Sraffa ? See Wiki article.

Note that Sraffa is making a practical attack to a theoretical construct.Jgard5000 (talk) 18:21, 8 October 2009 (UTC)Jgard5000

Hmm. If you start talking about things like agriculture and the labour market as a whole, you are approaching the realm of macroeconomics, not microeconomics. The linked article also seems to be confusing accounting cost and opportunity cost. I need to think more about your comments. Jrincayc (talk) 03:48, 9 October 2009 (UTC)

The attack is definitely aimed at certain foundational principles of traditional economic analysis - the assumptions that in the short run at least one of the factors of production is fixed and the independence of the supply and demand functions. S asserts that these two assumptions are contradictory. As to the independence assumption S's basic argument is that if you define the industry broadly - he uses agriculture - that diminishing marginal returns will hold (fixed factor) but that independence will not. S argues that if a large industry attempted to expand production it would put pressure on the labor markets. the large firm would attract labor from other industries; and this shifting of labor and increase in wage rate would induce a redistribution of income. A redistribution of income will affect the aggregate demand curve cause it to shift. So there would not be a unique demand curve associated with every point on the industry supply curve. If you defined the industry narrowly independence would hold but diminishing marginal returns would not. If the firm decided to expand production the small firm would either be able to use excess equipment and machinery or machinery from other firms. The result would be not diminishing marginal costs but constant or even decreasing MC. This really does not do justice to the argument i would suggest you read Keen Debunking Economics. Note that if S is right the standard model collapses. —Preceding unsigned comment added by 75.202.200.73 (talk) 15:13, 11 October 2009 (UTC)

Elasticity Does NOT "correspond" to slope

Elasticity is not the same as slope. Nor does it correspond to slope. The slope measures the absolute change in quantity demanded for a change in price. The slope varies with the units of mearsurement. Elasticity measures the relative change in quantity demanded with respect to a change in price. Elasticiy is a pure number - is not unit-dependent. Specifically elasticiy is the percentage change in one variable divided by the percentage change in another variable. Elasticiy measures the sensitivity of one variable to a change in another variable Jgard5000 (talk) 14:47, 14 May 2009 (UTC)Jgard5000 (talk) 14:47, 14 May 2009 (UTC)[There are two exceptions - the slope and coefficient of price elasticity are identical for perfectly elastic and perfectly inelastic demand curves]75.248.223.70 (talk) 18:45, 17 October 2009 (UTC)jgard5000

The change in the elasticity coefficient as one moves down a demand curve is only partially attributable to the slope. In fact, the coefficient of elasticity for a linear demand curve (slope is constant) continously decreases (in absolute terms) as one moves down the curve - because the ratio P/Q constantly decreases.

We can deduce the nature of the relationship from the slope - if the slope is negative, the variables are inversely related; if the slope if positive; the variables are directly related. Slope answers the question which way - elasticity answers the question how much. —Preceding unsigned comment added by Jgard5000 (talk • contribs) 13:44, 16 May 2009 (UTC)

Manchester School

This edit introduced some references to "Manchester School". I'm sorry that I don't know what that is. It sounds like maybe a working-paper series? If it's a reliable source I don't know about, please fill me in. CRETOG8(t/c) 09:09, 25 October 2009 (UTC)

Never mind, I think I found it. CRETOG8(t/c) 09:13, 25 October 2009 (UTC)

non-equilibrium framing

I'm thinking this article should be framed a little differently overall. Supply & demand as a concept/concepts are useful whether the market is in equilibrium or not. Certainly, it's most often used when the market is expected to be in equilibrium, but it's also used when out of equilibrium, to think about deadweight loss, shortages, or whatever. CRETOG8(t/c) 10:39, 25 October 2009 (UTC)

criticisms section

I created a "criticisms" section as a (hopefully temporary) placeholder for this material which was recently added. It needs to be cleaned up and given appropriate weight for the article. CRETOG8(t/c) 09:37, 24 October 2009 (UTC)

There was this bit on Samuelson: Paul A. Samuelson has acknowledged the cogency of Sraffa's critique: "What a cleaned-up version of Sraffa (1926) establishes is how nearly empty are all of Marshall's partial equilibrium boxes. To a logical purist of Wittgenstein and Sraffa class, the Marshallian partial equilibrium box of constant cost is even more empty than the box of increasing cost.". I've pulled it out. It's from some pretty esoteric comments-on-comments material, so parsing fully what is intended is tricky, but it isn't Samuelson endorsing the idea that upward-sloping supply is nonsensical. Earlier on the same page [1], Samuelson in fact writes that Sraffa had endorsed the upward-sloping supply in a "longer Italian version". Earlier comments by Samuelson also make it clear he still supports upward-sloping supply. CRETOG8(t/c) 10:33, 24 October 2009 (UTC)

Samuelson writes no such thing. -RLV 209.217.195.121 (talk) 11:39, 24 October 2009 (UTC)

Samuelson wrote "...in Sraffa's longer Italian version of 1925, he is said to have endorsed my position--namely that, as a matter of exact logic, the box of increasing-cost, rising supply is not empty even in an impeccable partial equilibrium model."[2]. As I said the stuff is fairly esoteric, but that seems pretty clear to me.CRETOG8(t/c) 11:50, 24 October 2009 (UTC)

According to your edit summary you were going to do something more with this quote. Could you do so quickly, or pull it out until you're ready, so it doesn't stay in the article as-is? CRETOG8(t/c) 15:24, 24 October 2009 (UTC)

No response, so taking it back out. CRETOG8(t/c) 10:27, 25 October 2009 (UTC)

I don't know how you believe you're using this quote, but it's in the article gives the strong impression that Samuelson rejects upward-sloping supply. If that's the case, then it should be possible to find a clearer quote from Samuelson which indicates that-perhaps from his textbook. If it's not the case, then the quote should either be reframed or (I think much more sensibly) removed. CRETOG8(t/c) 10:47, 25 October 2009 (UTC)

I'm not confident that this can be used as a WP:RS reference: Keen, Steve; Legge, John; Fishburn, Geoff. "A 75th Anniversary Present for Sraffa". Retrieved October 24, 2009.. It appears to be unpublished, except online? CRETOG8(t/c) 10:35, 24 October 2009 (UTC)

The article from Kirman on the relevance of the Sonnenschein-Mantel-Debreu theorem appears to be strictly about general equilibrium theory, not partial equilibrium, so without engaging in some WP:SYNTH, I suspect we shouldn't be applying it to this article. CRETOG8(t/c) 11:01, 24 October 2009 (UTC)

I'm not just trying to block criticisms, I just want to make sure the criticisms are carefully done and have proper weight. Something like putting "outdated" as one of the lead descriptors of the supply and demand model is waaaaaay off in terms of POV and weight, because-whether it should be or not-supply and demand is still one of the most basic tools in economics, applied all the time. I'll try to come up with some suggestions and not just naysaying. I know one suggestion would be to try to fish up empirical stuff rather than just theoretical criticisms. CRETOG8(t/c) 15:40, 24 October 2009 (UTC)

I don't think the Samuelson quote is of any use without adding so much context that the article would be overwhelmed. And its only purpose is a rhetorical one not suitable for Wikipedia, namely, to put an apparent concession of defeat in the mouth of a leading mainstream economist. Thinking about the criticism section in general, it could be made OK if rewritten in a more NPOV style. As I see it, there are two criticisms being put forward here.

First, stated in various ways, the standard supply-demand framework is only applicable with competitive behavior, that is all suppliers and demanders acting independently and taking price as parametric. This isn't really a criticism of the standard view, but a generally agreed point about the scope of applicability of the theory. The underlying disagreement is about whether there are substantial sectors of the economy for which the competitive assumptions are a reasonable approximation.

The second point concerns the legitimacy of aggregating over heterogeneous market participants to derive market demand and supply functions in the presence of income effects. I think the Sonnenschein-Mantel-Debreu theorem is the wrong way to make this point, but in the absence of an article on aggregation I guess it's not so bad a link. The obvious defence (for which I imagine we can find a source somewhere) is that in practice, these problems are fairly minor, and don't offset the usefulness of the supply-demand framework

There are quite a few more criticisms/qualifications that ought to be included - Leibenstein on Veblen and snob effects for example. JQ (talk) 01:10, 28 October 2009 (UTC)

No, John. The criticism section, unlike the above, fairly states the point of Sraffa (1926). Sraffa (1926) had a major influence on how Anglo-American economists saw the legitimacy of Marshallian partial equilibrium treatment of perfect competition, as Paul Samuelson knows. -- RLV 209.217.195.138 (talk) 05:13, 28 October 2009 (UTC)

The aggregation problem is not minor. As David Kreps note is his tezt, A Course in Microeconomic Theory (Princeton 1990), “...total demand will shift about as a function of how individual incomes are distributed even holding total (societal) income fixed. So it makes no sense to speak of aggregate demand as a function of price and societal income." Since any change in relative prices affects a redistribution of real income the result is that there is a separate demand curve for every relative price. Kreps goes on to say, "So what can we say about aggregate demand based on the hypothesis that individuals are preference/utility maximizers? Unless we are able to make strong assumptions about the distribution of preferences or income throughout the economy (everyone has the same homothetic preferences for example) there is little we can say. ..” The strong assumptions are that everyone has the same tastes and that each person’s taste remain the same as income changes so each additional income is spent exactly the same way as all previous dollars. As Keen notes the first assumption amounts to assuming that there is a single consumer the second that there is a single good. Kleen further states that the implications for traditional economics that you cannt draw conclusions about social welfare, there is no invisible hand and Adam Smith was wrong. Varian, a leading expert on microeconomic analysis reaches a more muted conclusion, "The aggregate demand function will in general possess no interesting properties..." However Varian went on to say," the neoclassical theory of the consumer places no restriction on aggregate behavior in general." Among other things this means the preference conditions (with the possible exception of continuity) simply don't apply to the aggregate function.Jgard5000 (talk) 23:26, 3 October 2009 (UTC)jgard5000 Does this mean that a good portion of microeconomic analysis is worthless? No. It means that it is useful as an approximation of aggregate consumer behavior and nothing more.

I didn't mean to say the problem was a minor one in theoretical terms, just that a defender of the supply-demand setup would endorse your last sentence, saying that it is a useful approximation, and that the more abstruse theoretical debates should be fought out in relation to general equilibrium theory. I haven't got access right now but I imagine Willig "Consumer surplus without apology" would be a good source. More generally, as I said earlier, an article on aggregation is definitely needed. JQ (talk) 06:55, 29 October 2009 (UTC)

Sorry for the overreaction. Jgard5000 (talk) 10:26, 29 October 2009 (UTC)jgard5000Jgard5000 (talk) 10:26, 29 October 2009 (UTC) The problem is summarized in the Ackerman text:

If we mistakenly confuse precision with accuracy, then we might be misled into thinking that an explanation expressed in precise mathematical or graphical terms is somehow more rigorous or useful than one that takes into account particulars of history, institutions or business strategy. This is not the case. Therefore, it is important not to put too much confidence in the apparent precision of supply and demand graphs. Supply and demand analysis is a useful precisely formulated conceptual tool that clever people have devised to help us gain an abstract understanding of a complex world. It does not - nor should it be expected to - give us in addition an accurate and complete description of any particular real world market. Goodwin, N, Nelson, J; Ackerman, F & Weissskopf, T: Microeconomics in Context 2d ed. Sharpe 2009 ISBN 9780765623010

This is a nice quote which would go well in the article. JQ (talk) 11:52, 29 October 2009 (UTC)

Problems with "Criticism of supply and demand" section

Supply and Demand is a certain kind of regularity that exists in society is it not? Criticism of this law would presumably argue that it does not reflect socio-economic reality. Whether free markets are better than command economies is another matter entirely. While I'm just as in awe of Consequentialist arguments against socialism as anyone, the failings of command economies should probably be dealt with elsewhere. If I need to be more explicit; Socialists don't necessarily think the law of supply and demand is a fallacy, rather, they are opposed to the economic framework in which it operates. The "utopian idealsts" slur should be axed too. User:bm 21:42, 25 January 2007 (UTC)

Just to let you know "command economy" is not synonymous with "socialism". While the Former Soviet Union did indeed have a command economy (ie: central planning), large corporations function in the same manner, some being larger than most nation states. In fact the idea that the USSR was a "socialist" or "communist" state is nothing more than Soviet propaganda designed to entice the working class. 24.36.78.185 (talk) 02:00, 26 March 2010 (UTC)

Yes, I've been thinking about this edit over the last week or so. We need to distinguish between two kinds of criticism:

1. It doesn't apply to free market economies (it's incorrect)
2. It shouldn't be allowed to operate (it's evil)

My first draft of the criticism section obviously fails to make this distinction clearly. Please help! :-) --Uncle Ed 14:30, 26 January 2007 (UTC)

This critisiscm section is misplaced and should be deleted. This is an article on the law of supply and demand and these ideas do are not normative in nature. Rather they are postive statements about the relationship between prices and quantites. While there is a proper place for these critiques, this is not the article (for the critiscms presented at this point). Perhaps the editors of the critiscm section might look to the following pages for future contributions: Economics, Capitalism, Free Market to name a few.

The laws of supply and demand are premised not on market structure, but rather behavioral assumptions (Rational choice theory), demand functions are derived from Consumer theory, while supply curves are ultimately based upon Diminishing returns Joel Kincaid 23:40, 28 January 2007 (UTC)→→

Perhaps there is criticism of the normative model(s), however. I haven't seen any of core supply/demand model, but here's a criticism of the aggregate supply/aggregate demand model, and here's a criticism of the law of supply. Λυδαcιτγ 05:15, 1 February 2007 (UTC)

See Backward bending supply curve of labour which this paper generalizes to situations in agricultural production. No big deal. Its covered on the referenced page. If you want to add a summary of the article to the backward bending page, by all means do so. That is not a relevant issue on this page.

what does aggregate demand and supply have to do with this page? this is an article on microeconomics not macroeconomics?

cheers Joel Kincaid 05:58, 1 February 2007 (UTC)

I'm going to flag this section as unreferenced - personally I don't think much of it makes sense, but it should at least be clear what it's based on. I'd like to try and edit it but don't find it very coherent. If it doesn't get some references in a while, we should then proceed to delete.--Gregalton 06:12, 1 April 2007 (UTC)

Not normative? Perfect competition - market imperfections.—Preceding unsigned comment added by Jgard5000 (talk • contribs) 19:34, 13 May 2009 (UTC)

economist

we should improve our economy —Preceding unsigned comment added by 119.160.15.117 (talk) 18:16, 30 March 2010 (UTC)

Vertical Supply Curve

I believe we have confused stock with flows. —Preceding unsigned comment added by 75.251.191.164 (talk) 21:29, 10 June 2009 (UTC)

The example of vertical supply curve could be improved. Perhaps the short term supply curve of a certain agricultural product is better since the supply of "land" is somewhat vague. 77.166.175.113 (talk) 19:47, 10 July 2010 (UTC)

Misuse of sources

Jagged 85 (talk · contribs) is one of the main contributors to Wikipedia (over 67,000 edits), and most of his edits have to do with Islamic science, technology and philosophy. This editor has persistently misused sources here over several years. This editor's contributions are always well provided with citations, but examination of these sources often reveals either a blatant misrepresentation of those sources or a selective interpretation, going beyond any reasonable interpretation of the authors' intent. Please see: Wikipedia:Requests for comment/Jagged 85. That's an old and archived RfC. The point is still valid though, and his contribs need to be doublechecked. Thanks!

I searched the Requests for comment/Jagged 85/Cleanup6, and found one major edit by Jagged 85. Tobby72 (talk) 21:55, 23 August 2010 (UTC)

Incorrect Hypothetical

"As a hypothetical example, consider the supply curve of the land. Suppose that no matter how much someone would be willing to pay for an additional piece, more land cannot be created. Also, even if no one wanted all the land, it still would exist. In such a case, land would have a vertical supply curve, with zero elasticity."

Supply is the quantity of a well defined good that a producer/seller is willing and able to sell at the given price under the exisiting circumstance. There is no market for all the land in the world. A better example is ocean front property in Malibu or a 1964 Chevrolet Malibu Super Sport.--Jgard5000 (talk) 18:27, 25 September 2009 (UTC)jgard5000 After additional research i am wrong see Nicholson, Microeconomic Theory 7th ed. page 401. Goods which are no longer being produced or for which there is a fixed stock are sometimes represented as having a perfectly inelastic supply curve. However, market supply is not the entire stock of goods it is the quantity of goods that sellers are willing to bring to market at various prices. As the price of durable goods increases it is reasonable to assume that more owners of such goods would be willing to sell them so that the supply curve would properly be depicted as being upward sloping. For example the Malibu case. There are a certain number of 1964 Malibu’s in existence and there want be anymore produced. Nonetheless at a given time and place there are only a certain number of these cars that are being offered for sale. A price increase might induce other owners to part with their cars. --Jgard5000 (talk) 11:09, 28 August 2010 (UTC)jgard5000

Empirical estimation needs work

The empirical estimation section contains no cites and even worse makes no mention of any actual empircal work. It needs to be made better or be deleted. Afuhz (talk) 17:50, 15 October 2010 (UTC)

willing and able

I'm going to undo the following two edits: this and this. I'm not quite sure from the edit summary what was supposed to be corrected. The first of those edits seems fairly harmless to me because the "and able" is kinda implied by the "willing". The second removed the "willing" part of the demand schedule, which is simply wrong. I am able to buy many things which I am not willing to buy at the prices they're made available. But perhaps more explanation here can clarify what those edits are supposed to mean. CRETOG8(t/c) 03:53, 22 February 2011 (UTC)

Using "willing and able" as all-purpose phrases lacks rigor. It confuses understanding of supply and demand.

Demand

A demand curve indicates that, whilst there is a total of people (potential customers) "willing" to purchase at different prices, only some are "able" because of their budget.

Clearly - those that are "able" at any time are a subset of all those who are "willing". IN short - If your willingness is not matched by your budget, you are unable to consume.

Supply

The same logic in reverse applies to supply. There are always suppliers who are "willing" to supply almost at any price, but there are fewer suppliers who are "able" to supply given particular market conditions. In short - if a suppliers' willingness to supply is not matched by the revenue they receive, they are economically unable to supply at that price.

Clearly - any number of suppliers that are able to supply (at a price) is a subset of all those who are willing.

Changed willingness, changed ability

Any movement along the demand curve, does NOT represent a change in preferences and therefore does not represent a change in willingness, or utility. It only represents that the numbers of buyers (ceteris paribus) is different. If willingness changes (for example if a previous substitute rises in price) - then the demand curve itself moves in or out (with respect to the origin).

Similarly any movement along the supply curve, does NOT represent a change in willingness to supply. It is only that, if the market price goes up, more suppliers are now able to supply. If the market price goes down, some previous supplies now become unable to supply. If a technological change occurs, and suppliers are now able to supply on a new supply schedule then the supply curve moves in or out with respect to the origin.

If we did not have this inherent interplay between "able" and "willing", the market mechanism would not work. Consumers benefit if budget ability moves into personal willingness. Suppliers benefit if their willingness expands to absorb their ability (based on capacity utilisation rates).

So a clear understanding of the economic market mechanism that underpins changes along curves compared to changes of curves, means that scattering "willing and able" phraseology jeopardises rigor. Unfortunately, at times, this weakens economic analysis and exposition - when we need to have tight, clear, rigorous concepts not over-burdened by confounding (or blurred) words.

If there is a strong analysis that shows that "willing and able" are always equal and active in the same way for both supply curves and demand curves - both for movements along curves, and for movement of curves, then I would like a reference. This phrase, as presently used, appears to be an opinion and could engender misunderstandings.

The whole point of economics is to develop ability to satisfy willingness, and not to assume one implies the other.

Wilcannia (talk) —Preceding undated comment added 13:14, 23 February 2011 (UTC).

ERROR: Competitive Market

This: "It concludes that in a competitive market" is totally wrong. The competitive market page that the link points to is even farther off because it refers to "free competition" which is a condition where the law of supply and demand does not apply since the seller sees totally inelastic demand and a fixed price.

Competition is not necessary for the law of supply and demand to operate since it also applies if the seller is a monopoly.

Tyrerj (talk) 09:02, 10 July 2011 (UTC)

Determinants of demand – a few tweaks

I've made a couple of tweaks to the list of determinants of demand that require more explanation than the Edit Summary allows room for.

1. Determinant of demand # 4: expections: I added "and incomes," because consumers may base their buying decisions on an expected change in income. (See the first paragraph in Friedman's Permanent Income Hypothesis.) E.g., a person expecting to be laid off in the near future may decrease his or her purchases of nonessential goods and services (like luxury goods or restaurant meals) before the reduction in income actually occurs.
2. I changed "buyers" to "consumers" in determinants # 4 & 5 primarily to be consistent with the terminology used throughout the rest of the section. ("Buyers" isn't ever used, is it?) If there's a consensus that it should be reverted, I'll gladly go along with it.

In both the "Supply schedule" and "Demand schedule" sections, I also changed firm's to firms' and buyer's to buyers' (which I subsequently changed to consumers', as explained above) – i.e., singular to plural possessive in both cases, because both the predominant context of the sections' discussions and the 5th determinant in both cases ("Number of ...") concerns market demand and supply, not individual D & S. (Individual D & S are both mentioned, but only briefly.) --Jackftwist (talk) 22:52, 29 August 2011 (UTC)

Marshall GE system?

The article says: Léon Walras first formalized the idea of a one-period economic equilibrium of the general economic system, but it was French economist Antoine Augustin Cournot and English political economist Alfred Marshall who developed tractable models to analyze an economic system. - Walras' was a GE system. Cournot and Marshall had partial equilibrium. What is that "but" doing there. Also Walras was also French. This is also somewhat repetitive with info down in the History section (though the fact that Cournot was the first one to draw some supply and demand curves is significant)

The "Other Markets" section is UNDUE (we keep Austrians from overtaking Econ articles, same should apply to Neo-Sraffians) and really belongs in the "criticisms" section. The criticism section itself is pretty confused, slapped together and has some undue stuff in it, as well as original research. Volunteer Marek  20:32, 6 October 2011 (UTC)

Graphical representation of supply and demand

It seems to me that this section of the article should have some ... graphs. Isn't that the section title? Tres (talk) 07:32, 13 July 2012 (UTC)

mass production

I removed the section on mass production. It does come at some worthwhile points about economies of scale, but in a way that isn't helpful, such as talking about lowering costs to increase demand. I'm not sure if it belongs on a page about supply and demand is better suited elsewhere, but in any case it needs better references and more careful wording. CRETOG8(t/c) 01:33, 29 September 2011 (UTC)

Supply and demand as historically taught applies more to near short markets, such as commodities, and is a carry over from classical economics. Classical supply and demand was recognized during the early of mass production to be incorrect after the world moved into a continuous growth mode. Whole generations of people have gotten only part of the story. See:Beaudreau, Bernard C. (1996). Mass Production, the Stock Market Crash and the Great Depression. New York, Lincoln, Shanghi: Authors Choice Press. {{cite book}}: Cite has empty unknown parameter: |coauthors= (help)

Perhaps you can help reword it and stop perpetuating half correct theories.Phmoreno (talk) 02:03, 29 September 2011 (UTC)

I shortened it considerably. Let there be no half truths!Phmoreno (talk) 02:36, 29 September 2011 (UTC)

It looks like the Beaudreau source is self-published (Authors Choice Press is a self-publishing service), so I don't think it would cut it as WP:RS. I haven't checked out the references on Ford and Edison yet. Regardless, the section still seems to be promoting very odd ideas, so I'm pretty sure they're either being given undue weight or, possibly, just need better explanation. The talk page is probably the place to try explaining them first. CRETOG8(t/c) 06:09, 29 September 2011 (UTC)

This is hardly an "odd idea", just pointing out the facts. In historical economics you will find the typical example is that technology reduced prices and supply and demand both shifted to equilibrium at drastically higher levels. Economics Professor Beaudreau said something to the effect that Ford turned the laws of economics upside down with mass production. Ford understood productivity and that reducing cost would create demand. Ford attributes this idea to Edison, which you can find on line at the reference I added. The story of the price reduction with Ford's redesigned factory using the assembly line and a wide variety of other labor labor saving methods is legendary. The Model T price fell from about $750 to $360 in a very short time, causing demand to soar.

The most significant example of technology lowering price and shifting both supply and demand is electricity. With steam turbines replacing reciprocating steam engines and with increasingly higher boiler pressures, the conversion efficiency of fuel to electricity rose. Economies of scale with the appearance of electric utilities using more efficient generation and distribution systems lowered the price of electricity over 95% and both supply and demand increased by orders of magnitude.

See Fig. 3: http://www.fraw.org.uk/files/economics/ayres_2005.pdf

Phmoreno (talk) 13:39, 29 September 2011 (UTC)

If technology reduces costs, then you expect the supply curve to shift down/right, and the new equilibrium has a lower price and a higher quantity sold. That's standard economics, and what you describe above with mass production and so forth fits with that just fine. But the technology (in this story) hasn't increased demand. That's why I'm not quite clear what you're trying to say. There can be complications. For instance, if an industry is big enough to have macroeconomic effects then the increased income of the workers could increase demand as well. CRETOG8(t/c) 15:21, 29 September 2011 (UTC)

For most goods and services produced today it's the cost of the incremental production that matters most, not the quantity supplied. In other words, substituting "cost of production" for "supply" is a more accurate description. Phmoreno (talk) 17:41, 29 September 2011 (UTC)

One could argue what's "more accurate", but here it's not a matter of WP:TRUTH, but what fits with more-or-less mainstream analysis. Supply is what's used in economics, and supply is clearly based on the incremental costs of production. What you seem to be saying here is very standard textbook economics, but the way it's incorporated into the article makes it seem very different. CRETOG8(t/c) 18:25, 29 September 2011 (UTC)

I'm pulling the section out again. Unless we can get to something which is clear and not particularly contentious, it doesn't belong. The Beaudreau reference is self-published, so probably inappropriate. Edison's strategy on lightbulbs is interesting, and a great example of learning economies, but doesn't invalidate the notion of supply and demand, nor does it imply that changing costs changes demand. (While extraordinarily clever people, neither Edison or Ford was an economist, either, so we'd have to be careful using their analysis here.) CRETOG8(t/c) 00:48, 30 September 2011 (UTC)

This article needs a clarification in the lede saying that classical supply and demand applies to the short term, for example, a future delivery month commodity contract. When the law supply and demand was originally stated the world lived in more of a steady- state equilibrium, but all that changed with the Industrial Revolution. The well-known examples include cotton spinning, cotton after the invention of the gin, cast iron after substituting coke for charcoal and the introduction of hot blast and processes for making cheap steel. In all these examples the increase in supply was 100 fold or more and price fell by over 90%. Although this is a supply shift, it is misleading to think it can be shown on the same curve, unless the scales are logarithmic. Phmoreno (talk) 15:22, 22 November 2012 (UTC)

Contradiction

The law of supply and demand is contradicted by early electrification, where electricity prices were high because lighting was the only significant use of electricity.

One of the biggest problems facing the early power companies was the hourly variable demand. When lighting was practically the only use of electricity, demand was high during the first hours before the workday and the evening hours when demand peaked. As a consequence, most early electric companies did not provide daytime service, with two-thirds providing no daytime service in 1897. The widespread introduction of electric street railways and later AC motors created daytime demand, which allowed utilities to lower prices. This same argument applies to many other economies of scale. See: Electrification#Load factor Phmoreno (talk) 23:27, 8 January 2013 (UTC)

Please pay attention to appropriate linking: this article is used an example

The guidelines at Wikipedia:Manual of Style/Linking#An example article uses this article as an example:

For example, in the article on supply and demand:

• almost certainly link "microeconomics" and "general equilibrium theory", as these are technical terms that many readers are unlikely to understand at first sight;
• consider linking "price" and "goods" only if these common words have technical dimensions that are specifically relevant to the topic.
• do not link to the "United States", because that is an article on a very broad topic with no direct connection to supply and demand.
• definitely do not link "wheat", because it is a common term with no particular relationship to the article on supply and demand, beyond its arbitrary use as an example of traded goods in that article.
• Make sure that the links are directed to the correct articles: in this example, you should link good (economics), not good.

Despite the above, the word "wheat" has been linked in this article since 2004 (the above was incorporated into the guideline in 2009 but may have been moved from elsewhere). I'm leaving this note here and at Wikipedia talk:Manual of Style/Linking#Discrepancy between guidelines and example article to draw attention to this and encourage cross-checking to avoid such discrepancies recurring. —sroc 💬 12:57, 2 February 2014 (UTC)

Dr. Fujii's comment on this article

Dr. Fujii has reviewed this Wikipedia page, and provided us with the following comments to improve its quality:

Compared with the treatment of history, which presumably benefits only a limited fraction of readers, the treatment of empirical estimation is very limited. Further, the description is probably completely incomprehensible to non-economists.

We hope Wikipedians on this talk page can take advantage of these comments and improve the quality of the article accordingly.

Dr. Fujii has published scholarly research which seems to be relevant to this Wikipedia article:

• Reference : Tomoki Fujii, 2014. "Is urban food demand in the Philippines different from China?," Working Papers 18-2014, Singapore Management University, School of Economics.

ExpertIdeasBot (talk) 16:42, 19 May 2016 (UTC)

Dr. Kebede's comment on this article

Dr. Kebede has reviewed this Wikipedia page, and provided us with the following comments to improve its quality:

good article

We hope Wikipedians on this talk page can take advantage of these comments and improve the quality of the article accordingly.

Dr. Kebede has published scholarly research which seems to be relevant to this Wikipedia article:

• Reference : Bereket Kebede, 2004. "Intra-household Distribution of Expenditures in Rural Ethiopia: A Demand Systems Approach," Development and Comp Systems 0409032, EconWPA.

ExpertIdeasBot (talk) 09:17, 16 June 2016 (UTC)

Dr. Jambor's comment on this article

Dr. Jambor has reviewed this Wikipedia page, and provided us with the following comments to improve its quality:

It is hard to write shortly on supply and demand as basic notions of economics but the author has made a great job here.

We hope Wikipedians on this talk page can take advantage of these comments and improve the quality of the article accordingly.

Dr. Jambor has published scholarly research which seems to be relevant to this Wikipedia article:

• Reference : Bakucs, Zoltan & Jambor, Attila, 2014. "Consumer price volatility in the New Member States: Insights from the agri-food sector," 142nd Seminar, May 29-30, 2014, Budapest, Hungary 169793, European Association of Agricultural Economists.

ExpertIdeasBot (talk) 18:20, 27 June 2016 (UTC)

Inaccessible to the lay reader

The following quote, from the criticisms section, is inaccessible to the lay-reader:

"The philosopher Hans Albert who argued that the ceteris paribus conditions of the marginalist theory rendered the theory itself an empty tautology and completely closed to experimental testing. In essence, demand and supply curve (theoretical line of quantity of a product which would have been offered or requested for given price) is purely ontological."

I understand this is a highly-abstract argument in a highly technical field, but the purpose of an encyclopedia is to summarize information succinctly and clearly for public consumption. I'm not a total ignoramus--both "tautology" and "ontology" are in my vocabulary--but I can't make heads nor tails of these sentences. This passage is completely opaque and needs some elucidation.

-It is just stating the obvious that demand and supply curve is like Freudian ego/ido or 4 elements theory (fire, water, earth, wind) of alchemist, and is beyond empirical measurement. Only thing which is empirically measurable is actual sale which took place. What could have been sold at different price at the same time the sale took place is purely hypothetical/philosophical/ontological speculation unless one can look into a parallel universe. .

- Hi. There's a problem with the statement of the argument. It's incomprehensible even to those who know the meanings of the words. The last sentence should substitute "tautological" for "ontological." — Preceding unsigned comment added by 2604:2000:6154:B800:68C9:9AAB:7414:ACF8 (talk) 07:45, 3 September 2018 (UTC)

- Hi. The Hans Albert critique seems obsolete. As it stands, a bit like reading "someday man may walk on the Moon". Back in the 1960s, Vernon L Smith developed market experiments based on induced Supply and Demand with markets populated by human subjects (1962, American Economic Review). For this and other work based strongly on supply/demand experiments and competitive market models that rely upon rational profit-seeking behavior, he shared the 2002 Nobel Memorial Prize in Economic Sciences. The shared prize was with alternative work about individual choice (not markets) under uncertainty (Daniel Kahnemann's) that focused on human irrationality or departures from rationality.

Merge proposal

The following discussion is closed. Please do not modify it. Subsequent comments should be made in a new section. A summary of the conclusions reached follows.

N Stale No discussion in over 10 months. Any user, including the user who first proposed the merger, may move forward with this merge due to no opposition. (non-admin closure) 𝗙𝗼𝗿𝗺𝗮𝗹𝗗𝘂𝗱𝗲𝘁𝗮𝗹𝗸 20:55, 4 August 2021 (UTC)

---

Arising from an earlier discussion, it has suggested that Demand curve is best merged here, on the grounds that discussing supply and demand curves separately rather misses the point of them (see Talk:Demand curve). I agree. Klbrain (talk) 17:35, 19 September 2020 (UTC)

The discussion above is closed. Please do not modify it. Subsequent comments should be made on the appropriate discussion page. No further edits should be made to this discussion.

Consider Adding section: "Human Subject experiments with Supply and Demand"

In the 1960s, Vernon L. Smith developed market experiments based on inducing known Supply and Demand curves into a group of human subjects through conditional cash payments, and then observing the patterns of bids, asks, and trades in a market setting (1962, American Economic Review). For this and other work based strongly on supply/demand experiments and competitive market models that rely upon rational profit-seeking behavior, he shared the 2002 Nobel Memorial Prize in Economic Sciences. His work, along with numerous others, helped to found the specialty of Experimental Economics. — Preceding unsigned comment added by 66.18.52.166 (talk • contribs) 07:38, 17 September 2019 (UTC)

Rename to "Supply and demand curves"

I'd like to point out supply and demand is not limited to the neoclassical school, only price determination using Marshall's curves is. Indeed, as the history section points out, classical economists like Smith and Ricardo made frequent reference to supply and demand. As did Marx. KetchupSalt (talk) 11:38, 22 December 2021 (UTC)