SUPPLY & DEMAND SIMULATION

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Supply and Demand Simulation

Introduction

The concept and theory of supply & demand compromise to organize a principle that has been used to explain prices and quantities of products sold in a market economy. In theory, supply refers to the ratio of the price of commodities and the amount of available for sale to distributors or suppliers. On the other side, demand is the sum of all potential buyers to purchase each unit. The higher the price at which the property can be sold, producers will do the supply.

Current economic models assume that all consumers and sellers are rational and behave in a rational manner. The cost-benefit analysis of the economic environment intended to serves the wishes of the public services. The current economic downturn and the reasons for them to see that the difficulty in these models is that they are inherently error rate of the judgment. People do not always behave rationally, especially when you have the money.

Discussion

The supply and demand are respectively the quantity of goods or services as actors on a market are willing to sell or buy based on price .

If the theory of supply and demand recovers to Roger Guesnerie an old intuition, formalization begins in 1838 when Augustin Cournot introduces the demand curve. Later, Alfred Marshall introduced a supply curve representing the offer based on price ). As part of the theory of partial equilibrium between supply and demand, at the intersection of these two curves are the price and demand balance. The value of the model of supply and demand is that it allows extraordinary sophisticated formalism of general equilibrium in an intuitive way to understand the mechanisms involved in the decision of resource allocation in economy market

Special cases of supply and demand

Starting from a premise where riches are not rare but abundant, then we have a supply curve that has the same orientation as the request.

There are also cases where there is demand increases along with the price, while the decrease in price leads to a decrease in demand

the Giffen goods are essential items in the budget of major consumers: higher prices of these goods leads to a depletion effect equivalent to a loss of income, which requires to give up other consumption more expensive and fall back on the property, despite the price increase would, conversely, a decrease in the price of these goods freed financial resources that allows consumers to turn to more expensive products and reduced demand.

ancillary way, for some luxury goods and services extremely expensive (especially in the market for works of art and the recruitment of business leaders [ref. necessary] ) inverse behavior where when prices increase, vendors are less willing to sell and buyers eager to buy more. This phenomenon is called Veblen effect , greenhouse effect of ostentation or snobbery.

speculation , which generalizes in a situation of deflation , or conversely, of inflation : the rising price of an asset (or a general rise in prices) ...