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Since I studied economics I can attest that what you say is true for markets of n infinitely lived households that require no minimal sustenance, given a few te
by nasmorn 11y ago
Since I studied economics I can attest that what you say is true for markets of n infinitely lived households that require no minimal sustenance, given a few technical conditions such as free disposal of excess supply and such. In a world perfectly corresponding to this model the supply and demand relation is perfectly understood. How it changes when the conditions are not exactly equal to those used to solve the model is much less clear
- pdonis 11y ago> How it changes when the conditions are not exactly equal to those used to solve the model is much less clear The model I'm describing, while it is certainly an idealization, is not for that reason inapplicable to the real world. Idealized models are useful in understanding the underlying factors at work in a real situation, even if the real situation contains other factors that are not modeled. Often you can add those other factors in as constraints (for example, there's no reason why a microeconomic model has to assume "no minimal sustenance"; you just add the minimum requirement for sustenance as a constraint). Or you can expand the model to include interactions that were not previously captured (for example, if waste disposal is a significant factor, you can expand your model to include the economic transactions involved).