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Hmmm.. that’s not how supply vs demand works though
by bottled_poe 4y ago
Hmmm.. that’s not how supply vs demand works though
- SimplyUnknown 4y agoHow so? Supply goes down while demand is the same --> Price goes up --> Profit margin for the farmer increases --> Profits of mustard > profits of rapeseed --> Farmer produces mustard instead of rapeseed. This is exactly the consequence of supply and demand. The only noteworthy fact is that we got in this situation because it was not a completely free market but a regulated market due to subsidies for rapeseed, artificially increasing their profit margin.
- bottled_poe 4y agoBecause demand isn’t the same. Changing the price affects the demand.
- viridian 4y agoThis is exactly how a price shift in the supply demand curve works in basic macroeconomics. If you price shift a good upwards and the demand remains static, yield per good increases and then supply should increase as suppliers willing to supply at the new price is greater than supplier willing to supply at the old price.
- bottled_poe 4y ago> demand remains static, How can this be an assumption? Of course demand will respond to price.
- viridian 4y agoDemand is a slope, not a point. Price increases left shift demand, prices decreases right shift demand. This is because more people are willing to buy a good at a cheaper price than a more expensive one. In this context demand is the total desire of the market to consume that good at all, represented by a slope that has an inverse relationship with the price axis.