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Showing posts with label market. Show all posts
Showing posts with label market. Show all posts

8/12/18

How a change in tastes and preferences affects market price and market quantity

17:06
How a change in tastes and preferences affects market price and market quantity
This post was updated in August 2018 to include new information and examples.

This post asks the question of what happens in the market for a good or service when the tastes or preferences for the good or service change.  This question fits into our discussion about the determinants of demand

One of the determinants of demand is the current state of tastes and preferences for the good or service.  In this example, we will be focusing on the services for Romanian translation.  This may seem like an obscure topic, and it is to most people which will limit our demand for the service.  Because of our tastes or preferences for this specific service, we will have a low demand for it, especially compared to the demand for Spanish or Chinese translation services.  But imagine if the U.S. or Europe signed a new free trade agreement, or began spending billions of dollars in business opportunities in Romania.  This would potentially change our tastes and preferences for this service, and likely shift the demand curve right/up.

8/7/18

How to find equilibrium price and quantity mathematically

10:05
How to find equilibrium price and quantity mathematically
Edit: Updated August 2018 with more examples and links to relevant topics.

Summary:  To solve for equilibrium price and quantity you should perform the following steps:

1) Solve for the demand function and the supply function in terms of Q (quantity).

2) Set Qs (quantity supplied) equal to Qd (quantity demanded). The equations will be in terms of price (P)

3) Solve for P, this is going to be your equilibrium Price for the problem.

4) Plug your equilibrium price into either your demand or supply function (or both--but most times it will be easier to plug into supply) and solve for Q, which will give you equilibrium quantity.


When solving for equilibrium price and quantity, you need to have a demand function, and a supply function.  Sometimes you will be given an inverse demand function (ie. P = 5 –Q) in this case you need to solve for Q as a function of P.  Once you have both your supply and demand function, you simply need to set quantity demanded equal to quantity supplied, and solve.

This is best explained by using an example...

Suppose your monthly quantity demand function for a product is Qd = 10,000-80P, and your monthly quantity supply function for a product is Qs=20P, then we need to follow the first step outlined above and set Qd=Qs and solve for price.

1)    Qd=Qs   which is also equal to--
2)    10,000 – 80P = 20P

We then must add 80P to both sides, then divide by 100 to get:

6/30/14

Types of Market Failure

13:35
Types of Market Failure
This post goes over a quick discussion of the invisible hand, and introduces the invisible foot (kicking you in the ass for believing that markets work :) OR market failure).

There are four basic types of market failure for goods/services or environmental resources:
Externalities, public goods, common property, and hidden information.


  1. Externality: this is the most common case, where an activity has an effect on a third party who is not involved in the activity. Some examples include the student in front of you enjoying a bean burrito (and then polluting your air), a factory polluting a river that others then cannot swim in (who didn't buy the factory's product), and finally your dorm mate listening to music really loud and it annoys you (negative externality) or your enjoy it (positive externality). 
    1. Ecosystem externalities: It is crucial for natural scientists and economists to work together to properly understand these externalities and their effects on humans. For example, mining any type of ore out of the ground can result in forms of pollution or diminished air/water quality that affects people who either did not work for the mining firm or purchase their products.
  2. Public goods: Goods that are non-excludable (anyone can use them at any time), and non-rival (one persons consumption does not affect another's ability to consume). Pure public goods are both non-excludable and non-rival, while impure public goods are one or the other but not both. Allocation of public goods are generally inefficient because of...

2/27/12

How a change in income changes demand and thus equilibrium price and quantity

02:25
How a change in income changes demand and thus equilibrium price and quantity

For this economics example, let’s focus on the apartments for rent in the Calgary market.  If we assume that this market is in equilibrium to begin with, then we can designate equilibrium price and quantity with P* and Q* respectively.  Notice that in this market there is neither a shortage nor a surplus, the market is in equilibrium.  For this example, I am also assuming that the good in question is a normal good, not inferior.

2/11/12

Transaction/transportation cost and solving for equilibirum price and quantity part 1

22:05
Transaction/transportation cost and solving for equilibirum price and quantity part 1
This is a long difficult economics question about transportation costs.  This first part will go over the math for calculating the equilibrium, and future posts will discuss the implications of the other parts.

Assume that, when sellers have no transaction cost, buyers will pay the market price plus $18 in travel cost. If transaction cost were zero, demand would be D1 which intersect the SS curve at $19 and 31 units. With transaction cost of $18 per unit, the net demand facing sellers is D2, which is $18 below D1. The market clears at $19 units and sellers receive $13 for each unit. Now also assume that, an outsider tells buyers that for $8 per unit she will go to the market for them and eliminate their former $18 transaction costs. Sellers now perceive demand curve D3, $8 below D1 and $10 above D2. Sellers get $16.33 for each of the 25.67 units transacted. Both sides of the market benefit from lower transaction cost.

12/12/11

Solving for market equilibrium with individual consumers and firms

12:52
Solving for market equilibrium with individual consumers and firms

This article will go over the economics of multiple consumers and producers, and adding up their individual supply and demand functions to determine a market supply and a market demand.  These individual supply and demand functions will be aggregated to get market supply and demand mathematically and then market equilibrium will be calculated.  After this, a graph will be produced to visually show the markets interact and equilibrium price and quantity are determined.  The question is:

12/5/11

Notes on market failure, focusing on externalities and public goods

20:54
Notes on market failure, focusing on externalities and public goods

Market Failure: A situation in which the market economy equilibrium leads to inefficiency (the presence of a deadweight loss).  This means that either too many or too few resources are being allocated to a specific endeavor, and that the outcome can be improved by introducing smart government regulation.


The two types of market failures discussed here will be externalities, and public goods.


Externality: When a market transaction occurring between two parties has an effect on a third party not involved in the transaction.  Pollution and education are two types of externalities.