I got some issues with Supply/Demand ...

1) Does increasing supply decrease demand, or does it just decrease price?

2) Does decreasing supply increase demand, or does it just increase price?

3) Does supply/demand exist in the context of the U.S. economy? Has it ever existed?

 

To answer questions 1 and 2, I need more clarification: are you talking about shifting up/down or shifting out/in?

As for 3, yes it does, but it is heavily affected by regulation, tariffs, resource availability, consumer taste, elasticity of supply and demand, and dozens of other factors. It can't be quantified with a simple single-line graph.

 

sure it can.

1. If demand increases and supply remains unchanged, then it leads to higher equilibrium price and quantity.
2. If demand decreases and supply remains unchanged, then it leads to lower equilibrium price and quantity.
3. If supply increases and demand remains unchanged, then it leads to lower equilibrium price and higher quantity.
4. If supply decreases and demand remains unchanged, then it leads to higher price and lower quantity.

 

Supply and demand in America are affected by far more factors than simply each other. Keynesians try to take these complex issues and make "aggregate" graphs out of them, but way to often those graphs rely on assumptions, simplifications, and made up numbers.

 

If you really want to see an example of supply and demand in its purest form. Study the illegal drug trade.

 

Farmer's Markets are the classic example.

 

Yes most definitely it exists. Just take a look at the housing market before it collapsed. That is a product of supply and demand.

The biggest misunderstanding of this is "demand" in the context of economics is not what someone "wants". It is someone with the means to afford a good and the willingness to buy it.

So as more and more people were able to get the funds in order to buy houses it flooded the market with demand... driving up existing home prices and driving up the need for new homes.

And your other questions can not be answered in absolute terms because it simply depends on multiple variables.

 

To my way of thinking, demand is almost unchanging. Just because the price of a gallon of gas goes up and eliminates some buyers doesn't mean that the demand isn't still there. And the demand for, say, insulin isn't going to hinge on affordability.

I am at the point of throwing in the towel on supply/demand as a useful concept in the U.S. for the reasons you mentioned above plus a few others such as lobbies and protections.

 

Once again you are confusing what someone wants with demand. Your example above which says Just because the price of a gallon of gas goes up and eliminates some buyers doesn't mean that the demand isn't still there.

In economic terms, that is exactly what it means.

 

you will be throwing in the towl a lot then becaue there is not a perfect system out there. In concept sure, but execution always fails because one constent throughout human history. People are corrupt and no matter what system is in place, a few always end up on top and many end up without. I prefer our capitalist system because it allows for individuals to have more control over their fate even if its just a little, than have a system were someone else is in full control over you life.

 

I guess that's the issue. I'm saying the demand was always there. You're saying that demand is a function of affordability.

 

So there's the same demand for the number of cotton gins and cattle prods? This is obviously ridiculous.

This statement makes no sense. Lost some buyers, but demand unchanged? Sounds like demand adjusted to a supply side increase to me. Gas, like food and such though is a need for most, buying it isn't optional, so demand is "sticky".

 

In economic terms demand is a function of affordability and willingness to have. So there is always a demand for big houses, but if it costs $500,000 only those with $500,000 and willing to spend $500,000 counts as demand. Everyone else with out $500,000 is just dreaming.

 

Allow me! The quick answer is that it depends on the product. There is really no way to generalize your question across the economy. Remember that supply and demand ALWAYS work in tandem. So if you increase the supply of a very hot product, but the demand still outstrips the supply, the price really isn't going to move much (or at all). But if supply and demand are essentially in equilibrium, then bumping up supply will not result in any additional demand until the price drops. The price will eventually fall to the point where supply and demand are in equilibrium again.

Same as above. It depends. Assuming equilibrium, if you decrease the supply of widgets the price will rise until demand falls to match supply.

Hell yes it does. Always has. Always will.

 

That's all true (except that I don't equate capitalism with supply/demand), but in the end I'm saying we have a manipulate & command economy almost as surely as the Soviets had under Joe Stalin.

 

Of course capitalism is based on supply/demand. That is how economies work. That is why Apple, which sells expensive gadgets can be the largest company in the entire world.

 

Depends on the good. Economists define demand for goods as being elastic or inelastic.

Inelastic demand is for things like gasoline or insulin. No matter what the price is, you gotta buy it, so price has little effect on demand.

Elastic demand is for most consumer goods. A new TV is an example. If it's cheap, you buy, if it's expensive, you don't. Price has a huge effect on demand.

 

Nor should you, capitalism is an economic paradigm. Supply and demand is an economic term/concept that applies universally to all schools of economic thought.

Hyperbole. Capitalism needs a certain amount of government intervention to remain stable. Without limited liability and the protection of property rights capitalism couldn't exist.

 

There will be demand, but it changes all the time! No, the demand for fossil fuel is not going to hit zero until we have no more. But it is far from unchanging. It changes all the time and price is the major factor. When you trade in your SUV for a Prius you just lowered your demand.

The demand for insulin depends on the number of people with type 1 diabetes and the ability of those people to afford it (however they pay).

Do not get a "want" confused with "demand". For example, tons of dudes "want" a Ferrari. But the demand is actually far lower.

 

That's because those items (gas, insulin) are inelastic. People will need them regardless of their supply or price. The price of either can move up or down dramatically without really affecting demand.

However, there are lots of items that are extremely elastic. Most foods, clothing, cars, electronics, houses, etc are all elastic goods.

 

This cannot be simplified or answered because the case is ALWAYS different depending on the resource. If you are talking about resources for survival (food, medicine, warmth, etc), there is always a demand equal to the bare minimum needed for the whole of society to survive. If you are talking about luxuries, that's not necessarily true. You have to give a specific context, and then realize that that context does not relate to everything or even anything else.

 

I can't think of a single thing I buy where the price I pay is based on unadulterated supply/demand. Ergo, the concept is no good.

 

What do you mean? Everything you buy is based on supply/demand.

 

Should have stopped there, it's the only way to support the rest of what you said.

 

I said "unadulterated". Everybody, the government, business, corporations, buyers and sellers have shifted the curves so far in either direction that it is flat goofy to talk about supply and demand.