Talk:Supply and demand

Weasel words and Partial equilibrium

The first paragraph is riddled with weasel words. "Some" economists, "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 disputes about Aggregate supply and demand and effective policies to maintain low unemployment and economic growth and such but those are Macro issues. AS well, the last sentence "However, unlike general equilibrium models, supply schedules in this partial equilibrium model are fixed by unexplained forces." is a little confusing for someone reading this article for the first time. The supply schedule isn't unexplained. It's determined by the principle of marginal productivity of supply as well as other factors. Saying the supply schedule is unexplained is misleading. Finally, I don't see how a knowledge economy overturns supply and demand. When a product is non-rival (i.e. my consumption doesn't decrease your potential consumption), scarcity still exists. The supplier limits supply by charging for it. This is a case of a perfectly elastic supply. Supply and demand still applies. Sorry about the long rant, but I think it would be a good idea for these issues to be addressed for the sake of the article. Thanks. Justinmeister 16:41, 9 November 2006 (UTC)

Although I am of the same school of economics as the author as I am not as passionate in my response as Justinmeister, I agree that there is a lot of unnecesary POV here. The article should save all evidence for the limitations of microeconomics and supply and demand for a dedicated section or sections at the end instead of sprinkling it throughout. peergynt323

• It shouldn't matter what school of economics you consider yourself in, Wikipedia is supposed to offer a balanced view of a subject with verifiable claims and a neutral point of view. If many economists disagree with supply and demand, they should be cited, or else delete the claim. Justinmeister 16:08, 23 November 2006 (UTC)

• Justinmeister, why don't you edit the article into an acceptable form and remove the weasel-word tag, since you feel strongly about this issue and seem to be quite knowledgeable about it.User:Jaganath 15:18, 29 November 2006 (UTC)

It's not that I feel particularly strong about the issue, but as this is a featured article I reasoned that I should discuss issues with the article before making drastic changes. I was only hoping for some helpful suggestions before commencing. cheers. Justinmeister 00:17, 30 November 2006 (UTC)

The main criticism that I've heard about supply and demand, and a widely accepted one among economist, is about the "naming" of good, how well defined they are; to be comprehensive, that is all the literature related to Akerlof's Lemons. I've heard many strange economists, but none would dispute S&D applies with one well defined good.

Economics text are littered with weasal words - read some - if you want examples ask. —Preceding unsigned comment added by Jgard5000 (talk • contribs) 22:16, 13 September 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)

To strenghten:

Socialists as in Scientific socialists (marxists) are are anti-utopians and anti-idealists. They are dialectical materialists. The tekst referring to "Utopian and idealists" is completely absurt in that sence. Marxists critisise supply and demand becouse it may (and usually does) compromise the abbility of someone to fully enjoy the fruits of his or her labour. Or, at the other hand enables someone to steal someone else's labour. When you worked 2 hours producing one bag of grain, but the prices of grain are low becouse of high supply, you could only sell it for one credit per pag. The other guy, who worked 2 hours producing one bag of strawberries, sels it for 2 credits becouse the demand is high. Now, the second person is able to buy 4 hours of your labour in exchance of 2 hours of his own. Thus, he essentialy exploits the first person's labour. Not becouse he worked harder or better, but just becouse of the anarchy of the market.

Thus, Marxists argue for a democratically planned economy, to avoid these things from happening. What we have seen in the USSR and other so called "Communist" (but essentialy stalinst, non-socialist) countries was a bureaucratically planned economy, with a parasitic caste at its top. Thus, becouse the economy was not democratically planned, demand could not be mapped and only the prestige of the Stalinist bureaucracy was importiant for the plan of production. However, even how much I dislike the Stalinists, we can see that thanks to the (even dogh bureaucratically) planned economy russia, wich lived in the middle ages at the time of the revolution, was able to develop a economy wich was able to defeat nazi-germany and put the first object, animal and human into orbit. This cannot be ignored, even in spite of the monsterous terror of Stalin and the low production of consumer goods.

People who still beleve in the idea that the capitalist market will help us (humannity as a whole) any further, those are utopian and idealist dreamers... The ones fighting for Socialism, worker's controll and a democratically planned economy, those are the realists.

Bobby Siecker.

PS. Do not forget that a planned economy was originally intended as a DEMOCRATICALLY planned economy by the marxists and the bolshewiks. Do not see the abomination of stalinism as someting that represents marxist or communist tought in any way. —The preceding unsigned comment was added by 86.84.223.146 (talk) 17:11, 26 January 2007 (UTC).

• Wow, you really don't understand anything at all about supply and demand. Discussion pages aren't here to push your ideology though... Justinmeister 21:31, 26 January 2007 (UTC)
  • No, this is exactly the type of critical comment I was looking for. 146 has neatly summed up the chief socialist objections to Supply and Demand here. Next task: add this to the article, in a properly "encyclopedic" manner.
  • We need a balance between pro- and anti- here. --Uncle Ed 22:03, 26 January 2007 (UTC)

(Also please see comment in previous section). If contributors are going to insist on adding pro and con to this article them please cite your sources. This article has already lost its FA status, partly because of lack of source citing. I' going to work on this over the next few days. Joel Kincaid 23:47, 28 January 2007 (UTC)

Well, the pro and con doesn't have to be here. Maybe in Free market economics, Market economy or Capitalism?

Or summarized here, with a {main} link to main criticism article. --Uncle Ed 14:31, 29 January 2007 (UTC)

• First of all, a "balanced" article is only really necessary when there is a controversy over the validity of the theory in question. Supply and demand is an undisputed theory in economics. Just because some people (such as Marxists, or socialists) don't like it doesn't mean we should offer an equal balance of positive and negative comments. As well, the argument that Siecker (146) made makes no sense at all because of his underlying assumptions. He assumes that every job should be paid the same amount for the given amount of time which is ludicrous. Plus, there is no such thing as supply being "low" and "high" in a market. Supply can only be in "equilibrium" with demand, or be above or below that. The amount one is paid for a given service isn't seemingly random (like say the fluctuations on the stock market) but rather is derived from the relationship between the supply schedule and the demand schedule. Maybe should actually read about microeconomics before arguing about a thing you don't understand. Please cite a source for any criticism or don't add any at all.I'm not trying to attack you but the reason this article went downhill was due to its content being diluted by people who felt their ideology was threatened by what economists are in universal agreement about. Justinmeister 17:45, 29 January 2007 (UTC)

New lead section

I've rewritten the lead section. I believe it's been vastly improved and now has a definition that is comprehensible by a casual reader. If other changes are needed in the lead section, let's discuss it here and reach consensus. I hope it looks it good to everyone else! Justinmeister 22:30, 29 January 2007 (UTC)

I added price to the intro.

By the way, my experience with Marxists and other free-market critics is that they use a two-track strategy. On the one hand, they will claim that allowing prices to reflect demand is immoral (or unethical); e.g., why should the poor suffer when supply drops? On the other hand, they also ASSERT that the free market doesn't even WORK. That is, they cast doubt on the idea that prices if allowed to float, will find a new stability and/or that suppliers will be motivated to "capitalize" on the higher prices by increasing supply.

I'm still not sure this article is the proper place for the debate, but I think we should respond to the Marxist strategy in two different ways:

1. We should not cover the ethics of free market economics here. That ought to be covered in Capitalism.
2. We should provide sound economical research about whether or not the Law of Supply and Demand actually works as described. --Uncle Ed 14:56, 30 January 2007 (UTC)

• I rephrased the lead section again to accommodate price (you're right, it is integral). I changed "quantity supplied" and "quantity demanded" to supply schedule and demand schedule, as that is more accurate. By the way, its ridiculous to show research "proving" the workings of supply and demand because it is so fundamental in economics. Economics would simply not work without this concept. Economics IS supply and demand, in essence. The point of the article is not to "prove" the theory, but to inform. Justinmeister 16:42, 30 January 2007 (UTC)
  • I don't know if you've ever spent much time at a university (let alone one in Boston), but academia's take on Economics is not just a rational, objective description of free markets in general or the amazing workings of the US economy. Quite a few advocates of socialism are out there, buddy: people who will die for Marxism, command economy, etc. - or make you die for it.
  • Power, money, knowledge - this triangle dominates the world. And what seems obviously true to you (or me) is ofter hotly disputed or even condemned as "socially incorrect" in certain places. --Uncle Ed 17:21, 30 January 2007 (UTC)
  • The point is no economist disputes the basic supply and demand model. BTW, some people still believe in a flat earth too. As well, just because people make a lot of noise about it doesn't validate their argument. Most of their disagreements are based on fundamental misunderstandings of an issue that they don't understand. It's the same with evolution. People make a lot of noise about how they think it's flawed, immoral etc. but you're hard pressed to find a biologist who doesn't accept it. Having a section on the validity of a socialists viewpoint distorts the importance of the law of supply and demand in economics. Justinmeister 19:07, 30 January 2007 (UTC)

I'm not sure why Ed reverted wholesale my changes to the intro, since I thought some of them were not at all controversial. But I'll go through and redo the changes one by one, so you can object to specific ones. Λυδαcιτγ 20:12, 31 January 2007 (UTC)

Moved

The law of supply and demand states that "the price level will move toward the point that equalizes quantities supplied and demanded" ([1]). The law of supply states that supply is directly proportional to price. The law of demand states that demand is inversely proportional to price.

Since none of these laws circumscribes this article, its name should be simply "Supply and demand". Λυδαcιτγ 05:20, 31 January 2007 (UTC)

Moved back. Please discuss moves like this before making them.

Anyway, the article is not about supply and demand but about the Law of Supply and Demand which discusses how price is related to the two.

If you know of variations in the expression of the "law", please describe them before proposing a move. Thanks! :-) --Uncle Ed 15:38, 31 January 2007 (UTC)

• To be honest, law seems to have a POV attached to it. To me, it basically says "you're stupid if you don't agree". I think it would be better to change it to: Principle of Supply and Demand. THat would be more accurate and neutral, since in economics, there aren't really laws but fundamental principles. Just my thought. Justinmeister 16:08, 31 January 2007 (UTC)

• Ed, I would have hoped the ludicrousness of "Moved back. Please discuss moves like this before making them." would have been obvious before doing it. Leave the article were it has been for the longest time first, then get consensus to change it, which you failed to do when you made the move to your version in the first place. Instead you've decided where you want it, and are now reverting. That's extraordinarily unhelpful. Lets keep it without the law, it's more encyclopedic, and the topic is more commonly called that. The use of law is not universal. - Taxman ^Talk 17:21, 31 January 2007 (UTC)
  • Yes, I see my mistake now. I'm the one who didn't get consensus. Sorry. :-( --Uncle Ed 18:17, 31 January 2007 (UTC)
    • • Sorry, didn't mean to be harsh, it's just frustrating to see constant reversion when it is so easy to avoid. - Taxman ^Talk 00:13, 1 February 2007 (UTC)
    • So can I move the article back? Right now there are a bunch of double redirects. Λυδαcιτγ 18:32, 31 January 2007 (UTC)
    • Well, I went ahead and moved it back. Λυδαcιτγ 20:09, 31 January 2007 (UTC)
      • bah! No, that was my whole point: just leave it where it is and discuss. Perhaps draw some wider input if possible. - Taxman ^Talk 00:13, 1 February 2007 (UTC)
        • Oh, I thought that "Leave the article were it has been for the longest time first, then get consensus to change it" meant that you thought it should be moved back to its original title. Anyway, by all means let's discuss. Λυδαcιτγ 01:48, 1 February 2007 (UTC)

First, I do not see why one should think that the term "Law" used in the context of an economics principle is POV. See Law (disambiguation) and read the section regarding the use of the term "Law" in the context of science. Second, the standard usage is to speak of the "Law of Demand" and the "Law of Supply". Given the fact that these two models (Supply and Demand) are very important in economics, and very general, at some point it would be useful to have an article on each of those concepts.

The idea that is captured by the term the "Law of Supply and Demand" is, as was mentioned earlier, how equilibrium prices in a market are determined by the interplay of these two forces. While I do not find it a particulary descriptive term, the expression is in fact used in many principles levels textbooks. I teach those courses and can say that it is used by Mankiw (The most popular principles text at the moment), as well as by Tucker, and several other current books that I can not put my finger on at the moment.

Thus I would support keeping the title "Law of Supply and Demand". This reflects the usage that would be familiar to a reader that is using one of the current textbooks, and it would be good to keep in mind that a reader not yet in an economics course, should see terms that are actually used when they attend a course.

Why not use principle instead of law. Well I've mentioned the Law (disambiguation) page. There the key feature would be that a 'Law' would have some empirical verification or support, which is not needed for a principle, which can simply reflect some theoritical point. The difference is not much, but one would surely not want to say the "Principle of Supply". We are trying to produce a document that reflect the usage of these terms in economics, and not our opinions about whether its a valid use of the term law (i.e. this is not the place for dicussions of Hard science vs. Soft science, which I assure you will start raising POV flags quickly -- the proof, as you'll see on those pages, is in eating the pudding).

Finally, it allows us to at some time illustrate the point with the (perhaps bad) joke of a person living above the artic circle trying to sell ice. His friend makes the comment that he thinks its the "Law of Supply and Demand" not the "Law of Suppy or Demand"!

Joel Kincaid 22:02, 31 January 2007 (UTC)

I agree that calling the law of supply and demand a law is a good idea. But I don't think it's a good title for the article.

Let's look at how other sites describe it. These are the top sites from a Google search for "supply and demand" (no quotes). I ignore four ([2] [3] [4] [5]) that don't mention any laws.

1. This page discusses demand and supply separately, and then discusses them together as a model. The law of demand is discussed, but interestingly, the author maintains that "there is no law of supply that matches the law of demand" (I disagree, since any law can have exceptions, and, as discussed in our article, the law of demand can). The law of supply and demand is not mentioned.
2. This page discusses only the law of supply and demand: "The law of supply and demand predicts that the price level will move toward the point that equalizes quantities supplied and demanded".
3. This page discusses the laws of supply and demand separately, and does not mention the (singular) law of supply and demand.
4. This page seems to suggest that the law of supply and demand refers to the mechanism by which supply and demand equalize.
5. This page http://william-king.www.drexel.edu/top/prin/txt/SDch/SD10.html discusses] the law of demand only.
6. Here is my strongest support. Henderson explicitly refers to the "three laws" of supply and demand. Here are his definitions:

LAW I. When, at the price ruling, demand exceeds supply, the price tends to rise. Conversely when supply exceeds demand the price tends to fall.
LAW II. A rise in price tends, sooner or later, to decrease demand and to increase supply. Conversely a fall in price tends, sooner or later, to increase demand and to decrease supply.
LAW III. Price tends to the level at which demand is equal to supply.

In summary, I don't think the law of supply and demand is a widely-used term to describe the general model and theory of supply and demand. Rather, I think it's one of the three laws that, as Henderson says, "are the cornerstone of economic theory". Λυδαcιτγ 02:35, 1 February 2007 (UTC)

Ok. Let me mention a few things first. The correct google search would be as follows (including the qoutes): "+The Law +of Supply +and Demand" --- the qoutes give you exact phrase, the plus signs tell google to actually include the commen words 'the', 'of' and 'and' as specified. Doing this yields 256,000 pages. Doing the same search on google scholar yields 2320 hits. So you need to use the correct search if your going to report google hits (I dont trust that much anyway)

The text you cite, while a nice open document was published in 1922 (released in 2004). Things have changed a bit since 1922, particulary the terms used in principle level texts. Given that Marshall's text was first published in 1890, its not suprising that one would find multiple interpretations of terminologly 32 years after the concepts were formally introduced.

As I mentioned before this term is used in current principle level texts.

Thus, there is ample evidence of term being used on the web, and the fact that it is used in principle level texts.

Cheers Joel Kincaid 02:49, 1 February 2007 (UTC)

My purpose was to see whether the "law of supply and demand" was discussed frequently in sites explaining supply and demand. To search for "the law of supply and demand" (btw, I don't think the pluses are necessary in an enquoted search) would have eliminated all the results that didn't contain this term.

Searching for the term, though, turns up descriptions of the law of supply and demand as asserting that if supply is greater than demand, price will fall; if demand is greater than supply, price will rise. See [6] [7] [8] [9]. The last site actually lists three laws of supply and demand: "The first law of supply and demand states: when demand is greater than supply, prices rise and when supply is greater than demand, prices fall. These forces that push markets towards equilibrium also depend on how great the difference between supply and demand is. The second law of supply and demand, then, states: the greater the difference between supply and demand, the greater the forces on prices are. Naturally, then, the third law would say: when supply is the same as demand, prices do not change." I like this division.

Perhaps Marshall's text is out of date, but it certainly illustrates one possible nomenclature.

In terms of the use of the law in textbooks, the only one I have is Economics, which is AFAIK the most popular of all introductory textbooks. The 17th edition (2001) discusses the "law of downward-sloping demand", but no laws of supply or supply and demand. Perhaps you could look up the discussion of the laws in other texts. Λυδαcιτγ 04:53, 1 February 2007 (UTC)

Did you actually read my earlier comments? I teach economics! I explained that the term "The Law of Supply and Demand" is actually used by Mankiw --- Mankiws text is the most popular principles text on the market at the moment. Its used by most text books today. Check the citation here a link to the text of the Stiglitz's 2001 nobel prize lecture: In that lecture the following was used:

D. Consequences for Market Equilibrium

The law of supply and demand had long been treated as a fundamental principle of economics. But there is in fact no law that requires the insurance firm to sell to all who apply at the announced premium, or the lender to lend to all who apply at the announced interest rate, or the employer to employ all those who apply at the posted wage. With perfect information and perfect competition, any firm that charged a price higher than the others would lose all of its customers; and at the going price, one faced a perfectly elastic supply of customers. In adverse selection and incentive models, what mattered was not just the supply of customers or employees or borrowers, but their "qualityn-the riskiness of the insured or the borrower, the returns on the investment, the productivity of the worker.

In the above I added the bold. this is the reference: Information and the Change in the Paradigm in Economics, Joseph E. Stiglitz,The American Economic Review, Vol. 92, No. 3. (Jun., 2002), pp. 460-501. and this is the link [10]. Now this is a JSTOR link -- you may may not get access to the cite .... however you can see the first page.

If you won't listen to me, I'm hoping a Nobel Prize winner's use of the term will indicate that the term has some acceptance among professional economists, and that it should be obvious that what is important here is not what you can find on the web (by the way -- my suggestions about the search are dead on -- if people insist on using google to conduct some popularity contest of terms, then for goodness sakes, use the proper search techniques). Furthermore on JSTOR there are at least 500 journal articles (peer reviewed) that contain at least once phrase 'the law of supply and demand'.

If this does not convince you, please let me know what evidence I can produce. But before you do please review: WP:RS to name but one. All, and I mean all of the recent edits (ok maybe not all) to this page have degraded the quality of the information to a point where there is little to no hope of reaching a FA status, let alone a GA. Please, while enthusaism is a great thing, using and abusing the web for sources (the web does a generally horrible job with economics in particular it seems), and rehasing stuff that's coming from text books published almost a century ago is doing no one a service. Cheers Joel Kincaid 05:41, 1 February 2007 (UTC)

Joel, I don't disagree with you that the law of supply and demand has valid meaning, or that professional economists, article writers and Nobel Laureates use it. What I'm saying is that the law is not broad enough to cover the scope of this article. The law simply says that because of price, supply equals demand. I think the law is narrow enough to be covered in one paragraph:

The law of supply and demand states that the market price of a good is the intersection of consumer demand and producer supply. If the price for a good is at a low level where consumers demand more of the good than producers are prepared to supply, there will be a shortage of the good, and consumers will be willing to pay more for it. The producers will increase the price until it reaches the level where consumers would not buy any more if the price was increased. Conversely, if the price for a good is at a high level where the suppliers would like to produce more than the consumers will buy, the producers will be willing to lower the price. The price will fall until it reaches the level where consumers would be willing to pay more for the good.

The model of supply and demand is a hell of a lot more complex than just this law. There's the other two laws, and the complexities of the supply and demand schedules and their elasticities. And then there are additional parts of the model like minimum wages and price caps which actually invalidate the law of supply and demand.

I think the Internet does a decent job of covering economics, though you do have to weed out the junk. NetMBA's site is a good short explanation, in my opinion. And I think the consensus that I saw on the limited meaning of the law can't be discarded simply because I used Google.

But I understand that textbooks are often a more reliable source. As I said, Samuelson and Nordhaus don't even use the term "law of supply and demand", while Henderson describes it as a limited component of the S+D model. But Mankiw does. So could you tell us his definition of the law? Λυδαcιτγ 22:20, 1 February 2007 (UTC)

Ok. Lets consider what this page is (or was) about: it was about "the law of supply and demand". It was not about "the law of supply" nor was it about "the law of demand". Those two articles, which have not yet been created (but I mention that they should be in an earlier discussion on here), are sufficiently broad and important to justify an article each.

This article was about "the law of supply and demand". That law refers to the mechanism for price and quantity determination in markets. "The Law of supply and demand" deals with equilibrium outcomes (Prices and Quantities). "The Law of Supply" deals with the relationship between prices and quantity supplied. The law of demand refers to the relationship between prices and quantity demanded.

To sum up: There is a "Law of Supply", there is a "Law of Demand", and there is a "Law of Supply and Demand". This article, and the reader of this article and other economics articles, would be best served by having a relatively concise discussion of each of the "Laws" on separate pages. As an example we have an article on the Money supply that does not need to be discussed here or on the (eventual) article about "The Law of Supply".

I suggest that before going on a major rewrite,take a look at the List of economics topics for what articles exist. For instance you mention that want to discuss elasticity here. Fine, but it should be in passing, because the main article is Elasticity (economics). Furthermore, there are plenty of topics that would be useful to mention in this article, some of which have not yet be discussed: The role of prices in an decentralized economy, price determination under different market structures, to name a few. Again for all of these, its more useful to see what's out there before adding stuff (or subtracting stuff) willy-nilly. There are many pages that need to be merged, but I think those request should be placed on the Portal:Business and economics page, as well as in the future, I would suggest that any page moves should be discussed prior to the move on the page and on the portal.

Joel Kincaid 23:14, 1 February 2007 (UTC)

I agree strongly that this article should be a focal point for a variety of others. How about this: we'll write a new article at law of supply and demand, which will go into detail about the mechanism that achieves equilibrium. We'll keep this article as "supply and demand", and discuss here the entire model: an overview of the supply and demand curves (each of which will have its own page) including the laws of supply and demand, the law of supply and demand, and complications including other market forms and government interference. Thus, readers who want a basic overview can turn to this page, while those looking for a more detailed examination of particular parts of the model can go to their main pages. Λυδαcιτγ 00:49, 2 February 2007 (UTC)

I'm not sure I can add anything here. Per the naming conventions I think that an article's title should reflect the most common, universal name for the topic. While it is undeniable that Law is used to refer to the topic, it's not universal. To justify moving to that title would in my opinion require showing that it is nearly universal. Not just that the most popular text(s) refers to it that way, but that nearly every reference to the concepts of supply and demand refer to it as the law of supply and demand. So that's my two cents, forgive me if I haven't absorbed something from the rest of the discussion. - Taxman ^Talk 22:30, 1 February 2007 (UTC)

What the "law" describes

the model really describes the relationship between producers and consumers - oh, okay, that sounds pretty good. Let's hear more abouth that, then. --Uncle Ed 20:29, 31 January 2007 (UTC)

This change removed the technical language ("the relationship between the supply schedule and the demand schedule") from the intro by generalizing. While the model certainly describes the supply and demand schedules, its actual purpose is to show how producers and consumers interact. Generalizing both looks at the big picture and leaves room for additional parts of the model including price ceilings and taxes. Λυδαcιτγ 05:03, 1 February 2007 (UTC)

Relationship between consumers and producers

The first sentence in the lead is now a little confusing. A casual reader could interpret it to mean that their is a verbal or written agreement between consumers and producers. The real relationship is between the supply schedule and the demand schedule. It's how these interact that produce equilibriums . I feel that it should be clarified a bit. Justinmeister 01:01, 1 February 2007 (UTC)

How about now? Λυδαcιτγ 04:57, 1 February 2007 (UTC)

Title of page

Let's do a strawpoll, giving a brief summary of reasons. (Do not repeat points made above; simply allude to them! :-) --Uncle Ed 14:45, 1 February 2007 (UTC)

I asked for more opinions at Wikipedia talk:WikiProject Business and Economics. Λυδαcιτγ 22:29, 1 February 2007 (UTC)

Keep page at Supply and demand:

1. Audacity: describes entire model; "law of supply and demand" only refers to the move towards equilibrium

Move page to Law of supply and demand:

1. Uncle Ed: best known phrase; used in economic textbooks; does not connote an absolute
2. User:Joel Kincaid: See my comments above -- standard usage is the "Law of Supply and Demand"

Other suggestions:

So far, so good. But 2 to 1 is not enough to justify yet another jarring page move. Unless more people jump on the bandwagon, I'm not going to touch the title.. I'd rather work on the text right now. And Audacity is doing an audaciously good job there! :-) --Uncle Ed 22:28, 1 February 2007 (UTC)

Best-known phrase?

I was surprised to see Ed comment in the straw poll that the "law of supply and demand" is the best known phrase. I don't know if I'd ever heard the term before seeing this page. If you were to look up an article like this in a different encyclopedia, what would you look under? Λυδαcιτγ 22:42, 1 February 2007 (UTC)

Similar debate on "Double entry book-keeping system" and "Double entry accounting system" which refer to the same thing, the keeping of books, hence bookkeeping used to perform accounting but accounting is a familiar term but a wrong term in this case.

Terms come to be misused or simplified for lay people to understand. "Supply and demand" to me is the term. "Law of supply and demand", you could say "rules of supply and demand"; law emphasises its importance and that there are calculations to back it up. There is no law. Gravity is Gravity despite the use of "defying the laws of gravity", they are just numeric calculations. Supply and demand is an area which has calculations (laws or rules) to support it. NilssonDenver 22:27, 8 February 2007 (UTC)

Buyer's market and Seller's market

I've redirect Buyer's market and Seller's market here. But the dictdef text probably should be integrated into excess supply and excess demand sections... 132.205.44.134 22:50, 14 May 2007 (UTC)

Buyer's market

A Buyer's market is a phenomenon in business or economics. A Buyer's market is a market where supply is higher than demand. According to economic theory this implies that the supply price is higher than the demand price.

Seller's market

A Seller's market is a phenomenon in business or economics. A Seller's market is a market where demand is higher than supply. According to economic theory this implies that the demand price is higher than the supply price.

articles

The articles were transwikied to wiktionary already. 132.205.44.134 22:50, 14 May 2007 (UTC)

Delete "Criticism of Marshall's theory of supply and demand"?

Of course. Standard non-highbrow principles of economics textbooks like McConnell and Brue have for a considerable time carried Aggregate Demand and Aggregate Supply. It is simply not controversial as applied to macroeconomics, despite the suggestion otherwise by use of the term 'criticism'. The presence of this section might suggest otherwise, except that at the end there is the mention of mainstream economists who maintain that D & S are useful for macro. Marshall never claimed that the model could be used for macro purposes. So the criticism is a straw man. It also lacks verification. There are different micro and macro rationales of D and S. Maybe that needs a section. But that's no reason for keeping the section in question. Is it interesting enough to retain in section on the history of D & S? I don't think so and is tangential to this article. I believe that its inclusion violates Wikipedia:Neutral point of view#Undue weight and Wikipedia:Verifiability policies. Comments welcome for or against. --Thomasmeeks 21:42, 25 May 2007 (UTC) (fixed typos) Thomasmeeks 01:41, 28 May 2007 (UTC)

AGAINST deleting the section:

FOR deleting the section: Agree. Although useful bits/quotes should be incorporated (although much of it appears to be nonsense/straw men. For example, I don't think the note about prices being 'sticky' contradicts the idea of supply and demand, but the note and reference can be used.--Gregalton 05:13, 28 May 2007 (UTC)

In line with the above discussion (not merely counting heads as in a vote), the article section in question (which was section 11), has been removed from the article and moved below. Briefly stated from the above, the problem is that the heading and much of 1st 2 para. seem to violate Wikipedia:Neutral point of view#Undue weight and Wikipedia:Verifiability policy. Despite postings requesting citations in the section, none has been forthcoming. As the template indicates, such material is subject to challenge and removal at any time.

A brief alternative section indicating uses of Aggregate Demand and Aggregate Supply might be useful. The current section so skews presentation of the subject as to discourage efforts at mere revision. Why not start with a fresh slate instead of taking the current highly problematic "criticism" reproduced below as though it has serious standing? The 3rd para. below remedies para. 2 by contradicting it, in effect, "pay no attention to what you've just read" -- good advice perhaps but symptomatic of the section. Intent here is to improve the article, which is what Talk pages are for. --Thomasmeeks 15:13, 20 June 2007 (UTC)

Deleted section 11 from article:

Criticism of Marshall's theory of supply and demand

Marshall's theory of supply and demand runs counter to the ideas of economists from Adam Smith and David Ricardo through the creation of the marginalist school of thought. Although Marshall's theories are dominant in universities today, other economists have disagreed with it. One theory counter to Marshall is that price is already known in a commodity before it reaches the market, negating his idea that some abstract market is conveying price information.

Keynesian economics also runs counter to the theory of supply and demand. In Keynesian theory, prices can become "sticky" or resistant to change, especially in the case of price decreases. This leads to a market failure. Modern supporters of Keynes, such as Paul Krugman, have noted this in recent history, such as when the Boston housing market dried up in the early 1990s, with neither buyers nor sellers willing to exchange at the price equilibrium. Gregory Mankiw's work on the irrationality of actors in the markets also undermines Marshall's view of the forces involved in supply and demand.

Most economists (including Keynes, Krugman and Mankiw) do not hold that any of these criticisms fundamentally undermine the basic theory of supply and demand, even when they study so-called exceptional cases. For durable assets such as residential housing, or indeed any good which may be stored, the supply and demand model can be modified to take into account expectations of future prices by incorporating multi-period pricing issues. Most of the seeming exceptions to the theory of supply and demand, such as price stickiness, can be accounted for by similar modifications to the underlying model, and particularly by means of incorporation of uncertainty (risk).

Clean-up required

Someone needs to restructure this article. It has repetitive statements, not many citations and lacks flow and readability. Thanks.

Thank you for your suggestion! When you feel an article needs improvement, please feel free to make those changes. Wikipedia is a wiki, so anyone can edit almost any article by simply following the Edit this page link at the top. You don't even need to log in (although there are many reasons why you might want to). The Wikipedia community encourages you to be bold in updating pages. Don't worry too much about making honest mistakes — they're likely to be found and corrected quickly. If you're not sure how editing works, check out how to edit a page, or use the sandbox to try out your editing skills. New contributors are always welcome. Λυδαcιτγ 05:36, 19 June 2007 (UTC)

The template above amounts to saying, "So fix it." Well, here are some things that need to be fixed.

The problem with the article is that it uses so much technical mumbo-jumbo that the general reader cannot understand it.

Are we saying that demand drives up prices? And that higher prices will stimulate supply? If so, that should be made clear in within the first 200 words of the introduction.

Are there economists who deny the theory of supply and demand? Or have any exceptions been found? If so, these should be mentioned. (Maybe supply and demand is not really a "law" but wishful thinking?)

Last but not least, if there are economists or political activists who oppose the idea of letting market prices influence supply, then we should indicate this connection. Perhaps it is socialists who voice this objection the most, preferring that market signals from consumers be ignored and that central planning be used instead. A brief mention of this advocacy here would be good, with references to other economic systems where alternatives to the free market have been tried. --Uncle Ed 03:47, 6 July 2007 (UTC)

You make some interesting points, which I hope will be addressed in due course. The placement of the History section right after the Lead gets in the way of answering your 1st question. It does need work. The lead gives an overview. Without careful explanation, however, quick answers to your questions in the article may only mislead. --Thomasmeeks 19:13, 8 July 2007 (UTC)

Clean-up required: Market clearance

Why is the indednted material below worth preserving in the article? Can it be rehabilitated? It was section 6. If you think you can improve it enough to put it back, please try. It should not be up to the reader to figure out why it is there. Most of 1st para. recaps section 2. The rest seems incomplete by comparison with the main article. 2nd para. seems to recap the supply and demand. That seems pointless. --Thomasmeeks 01:03, 9 July 2007 (UTC) (proofreading Edit) Thomasmeeks 08:19, 10 July 2007 (UTC)

====Market clearance====

Main article: Market clearing

A market clears at the point where the quantity demanded is equal to the quantity supplied. Markets which do not clear will react in some way, either by a change in price or in quantity produced. Graphically the situation can be represented by two curves: one showing the demand curve and one showing the supply curve. The market clears where the two curves intersect. In a general equilibrium model, all markets in all goods clear simultaneously. For a century most economists believed in Say's Law, which states that markets, as a whole, would always clear and thus be in balance.

The market clearing price contains no maximization basis. As a result, any disequilibrium (excess demand or excess supply) is just a matter of graphical exercises. Some economists regarded that a demand curve could be represented by a diminishing marginal use value curve (the schedule of a consumer's maximum willing to pay with different quantity endowments). By this framework, people will buy when the market price is low enough, and they will sell when the price is high enough. In market clearing condition, the market price implies that the marginal use value of all participants are equalized. In other words, mutual gain of exchange is exhausted. Here come the basis of maximization for the concept of market equilibrium.

History section moved to last sect. of article

That's what the 08:19, 10 July 2007 edit of the article did. The intent was not to bury the History section but to save it. There might be some who would read the current article Edit for the first time and say: "Dang. Where's the History section." They'll find it easily enough in the Contents box that immediately follows the Lead section. And they can click down to it. One suspects that they are in a distinct minority. Rather, I believe many more might be put of off by the longish History section, heavy with Red and Blue links (as if to say: "You're not going understand ths article without first reading this section, & you're not going to understand this section without reading the links, Pumpkin."

OK, I exaggerate. Still, there is the fact that the section is not necessary for understanding the rest of the article. For those uninterested in the history, there is the danger of a snap decision that if an "uninteresting" section gets in the way of the rest of the article, some may stop reading, concluding the editors are of the "Eat-your-spinach" school of education. The object of the article should be to make it so interesting that readers are skipping ahead to read the History section. I believe that its current locationis likely to increase readership of the article & move the article closer to its glory days as a Featured Article. --Thomasmeeks 09:13, 10 July 2007 (UTC)

Unorthodox, but I like it. Λυδαcιτγ 22:35, 10 July 2007 (UTC)

Seriously? Is this really the latest in economics

A theory that is essentially unchanged in a century? I'm not an economist... but I find it hard to believe that statements like "The model predicts that in a competitive market, price will function to equalize the quantity demanded by consumers and the quantity supplied by producers, resulting in an economic equilibrium of price and quantity" are anything but Intro to Microeconomics 101. Equilibrium means a steady-state solution --- it should be obvious that markets are rarely in steady state. Steady-state is needed for equations that are not time-dependent to be of any use at all. Since the supply and demand equations appear to be polynomial functions of price from the example graphs, for equilibrium to be at all applicable (quasi-equilibrium), one of the functions must be "hot," relative to the other (the coefficients and forcing term must change many orders of magnitude faster than the other). Otherwise, any serious analysis would have to include the time-dependent terms.

On top of that, it appears from paragraphs like "... some people will buy a luxury car because it is expensive. In this case the good demanded is actually prestige, and not a car, so when the price of the luxury car decreases, it is actually changing the amount of prestige so the demand is not decreasing since it is a different good...," that when the data doesn't fit the curves one simply adds more terms. That's not science, that's curve fitting! Any function can be fit with a polynomial with enough terms. (And why aren't the equations explicitly shown in this article? D = C + Ax + ... ? Would one find such an oversight in a physics article?) Economists must know about falsifiability, no?

In biology, the wolf and rabbit problems is already quite old: the relationship between the number of rabbits and wolves is not a function, but has hysteresis. Of course, one could reduce it to a series of tweaked monotonic curves instead of looking at the underlying relationships, but that would be scientific nonsense. Aren't there any economists out there whose models aren't just poorly reworked 19th century thermodynamics? I find it hard to believe that with the number of PH.D's being produced in economics for the last century, this kind of nonsense hasn't been seriously debunked yet. (Of course, I could be wrong --- sigh). The sentence "For a normal demand curve, this can result in two stable equilibrium points - a high wage and a low wage equilibrium point," reveals the point --- it's not equilibrium at all, since there are metastable states.

Please, there must be someone with a serious academic economics background willing to take a stab at this --- at least some references to some work that use post 1890's math to analyze market behavior? Callithrix 21:58, 7 August 2007 (UTC)

Good theories can be far older that 100 years... Anyway, though, as you say, this article is Intro to Microeconomics 101. Basic economics relies on very simple mathematics. Why aren't the equations explicitly shown? Because they are not needed to understand the concepts. The model doesn't presume that supply and demand are polynomials or any other type of curve - just that demand is downwards-sloping and supply upwards-sloping. You are criticizing the model for its mathematical simplicity, when that is its strength. I am sure that there are plenty of economic models that do take into account advanced math, but they aren't needed for the basics that this article describes. For example, it's true that equilibrium never actually occurs, but markets do tend towards equilibrium, as described in the Changes in market equilibrium section. If the changes produced by time are relatively small, time does not need to be taken into account in a simplified model. Λυδαcιτγ

As Einstein said, as simple as possible but no simpler. If you are giving an account that is only applicable under very limited conditions, you need to state what the assumptions are - what the conditions are. The article has basically a couple of lines about "commodities" but in essence implies that supply and demand equilibrium is generally applicable. There are very few markets that I can see that actually tend towards equilibrium, and they usually have very high-frequency AC components. All the interesting markets are in constant fluctuation which is internally driven. My point is that this is a highly idealized model which only seems to apply even approximately for commodity markets which either have a very slow change in demand vs supply, or visa versa. Since the "real" economy is much more complex, a warning about this limitation and a pointer towards more realistic assessments is necessary - obviously I do not claim to have the expertise for such. If one were to write an intro to geometry, of course one would include Euclid; but then one would definitely point out that Euclid's geometries are only applicable for flat geometries - it doesn't work, for example, when tracking aircraft. In the case of economics, there are very, very few flat geometries.

Since basic physics doesn't depend on "simple mathematics", why would a far more complex system like economics depend only on "simple mathematics"? I guess it's possible that some economists have only used simple mathematics - but that's their failing, not good models. And if the mathematics is actually so simple, why not state it explicitly? One would not describe physical concepts (Newton's laws of motion) by just giving a verbal description - one uses a verbal descriptions just as in the intro to that article, and then describe the mathematics. The mathematics are the concepts, not the verbal description which are always ambiguous and value-laden. At least for scientific endeavors. I've read a couple intro microeconomics textbooks - they were complete hogwash, which was why I checked this article to see if it linked to some actually useful work. In simple words, when I and anyone else looks to invest, one looks for market disequilibria; that's what matters, the rate of change, the direction of change, and especially the highest order derivative one can identify - that's how capitalism works, capital can care less about steady state, no profit there.

Just try to describe the behavior of a simple, single-celled organism by equilibrium equations. Then I might believe that economies can be described the same way, to any reasonable approximation. You know what you call an organism approaching equilibrium? Dead. Callithrix 23:19, 9 August 2007 (UTC)

Check out Elasticity (economics) for a simple way of looking at rates of change. Jrincayc 02:35, 10 August 2007 (UTC)

I found a book that might interest you that does mathematically analyze economics: Numerical Methods in Economics. Jrincayc can give you a better idea, but my guess is that this is close to the latest in economics.

In regards to this article, let's continue the analogy with Euclid. For a basic education in geometry - the type that an encyclopedia article on the subject should offer - Euclid's mathematics suffices. It is inadequate for specialists or for advanced students, who will be directed to the Non-Euclidean geometry article. For supply and demand, the main article does not need to go into details - but other articles do. There are a few - Gini coefficient, Elasticity (economics) - but there's room for more. I don't know enough to write them.

I think the warning you advise may be obvious from the simplicity of the concepts in this article. But maybe not. However, I'm not sure how far off the models are. Although a market may not be at equilibrium, the effects described in Changes in market equilibrium should still occur - when the demand increases, the price rises, etc.

I agree about the importance of disequilibria in investing - but this article is not designed to help with investing. I'd say its main application is in public policy. Λυδαcιτγ 05:21, 10 August 2007 (UTC)

This discussion is why I'm an eventualist -- Callithrix please, if your going to make a call for Ph.D.'s to edit, I'd suggest that you take the time to actually examine the current state of the field before filling up space here with irrelevant material (what exactly do cells and Einstein have to do exactly with the law of supply and demand) that any Ph.D. in economics would (at best) find amusing and (at worst) evidence of why they do not want to participate. I suggest you google "replica economy" and start with the first two JSTOR hits -- after reading those articles and perhaps their references then please come back and edit the pages here to your desire. Of course most of those refer to general and not partial eqilibrium models. Also check out Econometrics for for an answer to one of your questions in your initial post. Happy reading. Corebreeches 15:10, 10 August 2007 (UTC)

I can't add to the excellent answers above. To the extent the question is not already addressed (by inference anyhow) in the article, perhaps more explicitness would help. There is additional help in the Lead links. The generality of analysis is suggested in Supply and demand#Changes in market equilibrium. The Einstein quote is at the top of 1 of the early chapters in William Baumol and Alan Blinder (2003, 9th ed.), Economics, Principles and Policy to make a general point about characteristic simplifying assumptions that run through the subject. Given the breath-taking lack of general knowledge of Econ. 101 principles, there is not much time for apologies by the econ. profession as to plying such a model. Practical neglect of its implications is only too frequent. --Thomasmeeks 19:33, 10 August 2007 (UTC)

Italian

You know, there's an italian page for this, but it's called Domanda e offerta. Maybe we should link to it. —Preceding unsigned comment added by 128.220.159.20 (talk) 05:54, 30 November 2007 (UTC)

Price control

What happens if a government sets a price range for a product and the value of the product falls or rises beyond the price range according to supply and demand? 88.112.193.13 (talk) 20:03, 6 January 2008 (UTC)

Audio version (never mind, I give up)

I'm making some minor changes to the article along the way, but since I'm not an expert in microeconomics, I may make a mistake. If that occurs, please tell me so I don't have to re-record the article. Hoogli (talk) 02:25, 30 May 2008 (UTC)

Your changes look good so far, as of this revision. -FrankTobia (talk) 15:56, 30 May 2008 (UTC)

Wow, this is harder than I anticipated. The article needs some serious cleanup. Still, I'm not giving up. Hoogli (talk) 01:22, 31 May 2008 (UTC)

Heh, that's a pretty funny subheading. In any case, I think you did a great job with the cleanup work, and attempting an audio recording was a valiant effort. I would suggest recording featured articles, which are much more likely to be well written. Good luck! -FrankTobia (talk) 02:29, 31 May 2008 (UTC)

goods and services

I just got rid of a few "goods and services" type bits, to make them just "goods". I think we can take it for granted that a service can in the generic sense of this article be a "good". And having "...and services" tacked on all over the place looks ugly to me. Cretog8 (talk) 15:42, 3 June 2008 (UTC)

"sweet inferior"?

The article says, "Giffen good (a sweet inferior, but staple, good)". Does that "sweet" mean something real? Cretog8 (talk) 16:17, 14 June 2008 (UTC)

Luxury cosmetics as Giffen good?

Some suggest that luxury cosmetics can be classified as a Giffen good. As the price of a high end luxury cosmetic drops, consumers see it as an low quality good compared to its peers. The price drop may indicate lower quality ingredients, thus consumers would not want to apply such an inferior product to their face.

Wouldn't that be more like a Veblen good, in which the high price is associated with quality, prestige, and conspicuous consumption? —Preceding unsigned comment added by 69.106.4.120 (talk) 00:10, 30 June 2008 (UTC)

Audio version

I created an audio version of this article, which can be found at http://en.wikipedia.org/wiki/Image:Supply-and-demand-9-28-08.ogg I don't know the processes for reviewing and adding it, but I am posting here so that those interested may listen and review it. Huadpe (talk) 05:56, 28 September 2008 (UTC)

In other words, supply means how much or how little objects the producers have to sell to consumers. Demand means how many consumers want to buy the producer's object. For example, If the consumers want a lot of the producer's object, and there are not enough objects to serve all the consumers, the price will go up to determine who will still be willing to pay that amount of money. If the producer has a large supply, and there is not so large of a demand, the price will go down. —Preceding unsigned comment added by 67.184.50.218 (talk) 01:28, 7 October 2008 (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

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)

Other Markets

The assumption of traditional economics is that firms seek to maximize profits by producing that level of output where marginal revenue (MR) equals marginal costs (MC). This is true for all market structures. For firms operating in a perfectly competitive market MR = AR = D = P. —Preceding unsigned comment added by Jgard5000 (talk • contribs) 17:46, 15 May 2009 (UTC)

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

Demand Schedule

Demand is the quantity of goods or service that a consumer is willing and able to purchase given such factors as price, income, price of substitutes, tastes, advertising and other non-price determinants of demand. Context - time place and circumstance are cirtically important in determining demand. —Preceding unsigned comment added by Jgard5000 (talk • contribs) 21:07, 19 May 2009 (UTC)

The demand curve is not the same as the marginal utility curve. —Preceding unsigned comment added by Jgard5000 (talk • contribs) 18:30, 9 June 2009 (UTC)

Criticism?

Shouldn't there be at least a note of criticism? It doesn't take a sage to notice something weird about this "law" When exactly do economist use this equation and why? "The Flaw of Supply and Demand" 24.36.78.185 (talk) 16:28, 22 May 2009 (UTC)

Economists borrowed the concepts of equilibrium and statics from physics. The problem for economist was applying a simple deterministic model to a complex system. The solution was straightforward. Eliminate the complexity through simplifying assumptions. [if the model doesn't fit the real world then change the world] The gain was a model that had mathematical precision and predictability. The sacrifice, realism. The assumptions of the traditional supply-demand model are not merely unrealistic they are absurd. (See Beinhocker, The Origin of Wealth (Harvard 2006). —Preceding unsigned comment added by Jgard5000 (talk • contribs) 15:14, 14 June 2009 (UTC) [statics requires a working knowledge of college algebra, rudimentary trigonometry and high school physics. I was doing basic mechanics in the eight grade. Below I have listed some of the basic assumptions of the model. I'll let readers determine how closely these assumptions comport with reality.

1. Consumers sole motivation is to maximize utility - the satisfaction derived from the consumption of goods and services.

2. Producers maximize profits.

3. All economic actors are completely rational

4. Only circumstances that can be quantified count

5. All economic actors have perfect knowledge - they are omniscient and omniprescent.

6. All economic actors act independently they are not affected by the actions of others

7. Economic actors communicate only through price

8. There are an infinite number of consumers and producers and infinite “supplies” of factors of production

9. There are no barriers to entry

10. No market power

10a. No advertising

10b. No control over resources

10c. No proprietary technology,

10d. No patents

10e. No trademarks

10f. No copyrights

10g. No geographical advantages

10h. No customer loyalty

10i. No branding or marketing

10j. No government regulation

10k. No collusion

10l. No labor contracts or trade unions

10m. No research and delopment costs

10n. No sunk costs

10o. No stocks of inputs

10p. No distribution networks

10q. No middle-men

10.r No economies of scale

10s. each producer produces an infinitely small quantity of goods or services. —Preceding unsigned comment added by Jgard5000 (talk • contribs) 16:36, 11 September 2009 (UTC)

11. Free entry and exit - no need to build factories they just pop up whereever needed - in fact there are no factories, no workers no consumers in any material physical sense - production materials - inputs (labor, materials, cpital) are instantaneously tranformed into products which are instantaneously consumed

12. Free mobility of factors of production

13. No inventories

14. All goods are instantaneously consumed - all products are instantaneously produced.

15. All goods and services are perfectly homogenous

16. No government

17. Time does not exist

18. System is closed and determisitic

19. No transaction costs

20. No information costs

21. All economic activities are flows rather than stocks - production is similar to gauging the flow of a river past a point - gallons per minute.

22. The system preferred state is equilibrium in all markets. Think laminar flow with small eddys (deterministic system) versus turbulence (chaotic system).—Preceding unsigned comment added by Jgard5000 (talk • contribs) 18:39, 9 June 2009 (UTC)

Even though producers have perfect knowledge they "regard" the demand for their products as perfectly elastic. This market behavior could be explained by a discontinuous demand function - if market prices are qouted only in hundredths of dollars then the market price would not change unless there was sufficient increase in supply to affect a greater than $0.01 change in price. The demand curve would be a series of disconnected perfectly elastic segments. Even though the model is perfectly deterministic increases in production by a firm do not increase supply. —Preceding unsigned comment added by Jgard5000 (talk • contribs) 18:49, 9 June 2009 (UTC) this simply is impossible.--Jgard5000 (talk) 04:43, 21 September 2009 (UTC)jgard5000

A person with perfect knowledge would immediatly detect the slightest change is supply and react accordingly. If the stock market priced stocks to the quitillionth of a dollar then offering a single share of stock for sale would affect the market price. --Jgard5000 (talk) 04:48, 21 September 2009 (UTC)jgard5000

There are no externalities positive or negative - no pollution, no global warming, no second hand smoke, no litter, no graffitti, no unmowed lawns, no nuclear waste, no public transportation. No network externalities, no knowledge spillovers, no public parks. —Preceding unsigned comment added by Jgard5000 (talk • contribs) 13:31, 12 June 2009 (UTC)

A fundamental assumption of neoclassical economics is that markets tend towards general equilibrium - equilibrium in all markets. That is after every exogenous shock the markets return to their equilibrium state. The question is how long would in take a modern economy to achieve general equilibrium. According to a study by Herbert Scarf, it would take " a mere 4.5 quintillion years for the economy to reach general equilibrium after each exogenous shock." Beinhocker, The Origins of Wealth (harvard 2006) at 63. That is 4, 500 000 000 000 000 000 years. Given that the universe is 12 billion years old - 12,000,000,000 - there is a problem. Id.

For discussion of barriers to entry see wikipedia article. —Preceding unsigned comment added by Jgard5000 (talk • contribs) 11:39, 10 June 2009 (UTC)

I would challenge the reader or casual observer to spin out the full implication of these assumptions. For example, no market power and no market share implies that each firm produces an infinitely small quantity of product. If a firm produces a measureable amount of product then it is not a perfectly competitive firm.

An odd thing about perfect competition is that there is no competition - no decision making, no choices, no free will, no human element - everything is completely determined wiht absolute precision. —Preceding unsigned comment added by Jgard5000 (talk • contribs) 20:14, 16 June 2009 (UTC)

The system is purely deterministic - the human element has been eliminated. Attempts to better conform the theory to reality are half measures at best, Particularly the incorporation of game theory and analysis of choice under uncertainty represent attempts to "modernize" the mathematical models which for the most part rely on 18th century mathematics. As to the vitality of traditional theory it is particularly telling to note the shift from theoretical to applied economics. Most graduate level programs require extensive course work in econometrics and probability theory rather than the hsitory of economic thought, mathematical economics and advamced theoretical econommics. Economics is virtually indistinguishable from finance.

If supply and demand is an eternal law

why do you have to learn it? 199.117.69.8 (talk) 20:37, 23 May 2009 (UTC)

While the supply-demand model has value as a first approximation of market behavior and operatons, the model does not meet the definition of a law. It is a theoretical construct. —Preceding unsigned comment added by Jgard5000 (talk • contribs) 20:57, 9 June 2009 (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)

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

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)

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)

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

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 [11], 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."[12]. 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)

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)

economist

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

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)

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)

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)

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)

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.[19] 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. This passage is completely opaque and needs some elucidation.