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A 1% decline in supply can have an enormous impact on price, because price is set at each instant by the marginal buyer and seller. For every 100 buyers (peopl
by cs702 5y ago
A 1% decline in supply can have an enormous impact on price, because price is set at each instant by the marginal buyer and seller.
For every 100 buyers (people) used to buying (eating) wheat every day, there is now only enough wheat for 99, on average. Wheat prices will therefore rise until 1 out of every 100 buyers cannot afford to buy their usual daily purchase of wheat. On average.
- alephnan 5y ago> marginal buyer and seller Yeah, but are end consumers actually buying wheat at the margin ?
- JumpCrisscross 5y ago> are end consumers actually buying wheat at the margin ? Yes, everything transacts at the margin.
- swagasaurus-rex 5y agoThe margin shifts for each step in the supply chain in order to pay for the work done in that step. And earn a margin on that work.
- throwaway6532 5y ago>A 1% decline in supply can have an enormous impact on price, because price is set at each instant by the marginal buyer and seller. I think this is where "elastic" vs "inelastic" demand makes a big difference.
- thehappypm 5y agoWheat doesn’t strike me as hugely inelastic. There are lots of alternatives. Sure, bread makers might pay double for wheat, but won’t a consumer just switch to potato bread or go for rice or mashed potatoes instead ? Ultimately the end consumer feeds the consumption engine, and they’re price sensitive especially when there are tons of alternatives.