Learn Before
Linearity of Supply and Demand Curves as a Simplification
For simplicity in economic models, both supply and demand curves are frequently depicted as straight lines. In reality, they are more likely to be non-linear. The precise shape of these curves depends on the distribution of valuations among market participants—that is, how willingness to pay (for demand) or willingness to accept (for supply) varies from person to person.
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Social Science
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Economy
CORE Econ
Economics
Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
Ch.7 The firm and its customers - The Economy 2.0 Microeconomics @ CORE Econ
Ch.8 Supply and demand: Markets with many buyers and sellers - The Economy 2.0 Microeconomics @ CORE Econ
Related
Willingness to Pay (WTP)
Gregory King (1648–1712)
Charles Davenant (1656–1714)
The Davenant–King Law of Demand
Law of Demand
A Graph Showing Two Alternative Demand Curves (D and D')
Impact of Demand Curve Steepness on Pricing Power
Price Elasticity of Demand
Estimating a Demand Curve via Consumer Surveys
Linearity of Supply and Demand Curves as a Simplification
Activity: Analyzing a Hat Shop's Price Change
Inverse Demand Function: Price as a Function of Quantity
Direct Demand Function: Quantity as a Function of Price (Q = D(P))
Definition of Aggregate Demand
The Price-Quantity Trade-Off in Firm Pricing Decisions
Market Demand Curve for Baguettes in a City (Figure 8.7)
Coffee Shop Pricing Strategy
A local coffee shop observes that when they price a latte at $4.00, they sell 200 lattes per day. When they increase the price to $4.50, they sell 150 lattes per day. Which statement best analyzes the relationship between these two observations?
The Logic of the Downward-Sloping Demand Curve
Critique of a Luxury Brand's Pricing Strategy
A bakery is analyzing the demand for its gourmet cupcakes, which follows a typical downward-sloping demand curve. Match each price-quantity point on the curve with the statement that best interprets the consumer behavior at that point.
According to the principles illustrated by a typical demand curve, a company that develops a new technology to significantly increase its production capacity for a popular gadget should expect to be able to sell the increased quantity at a higher price per unit.
A marketing analyst is studying consumer behavior for a new brand of gourmet coffee. The demand curve they have plotted is a steep, downward-sloping line. What does the steepness of this curve imply about the relationship between the coffee's price and the quantity consumers are willing to buy?
The downward slope of a demand curve illustrates the inverse relationship between price and quantity demanded; this means that as the price of a product falls, the quantity that consumers are willing to purchase will typically ____.
Jerry Hausman's 1996 Study on Cereal Demand
A market research firm has collected data on the weekly demand for a new brand of energy drink at various price points. Arrange the following price-quantity combinations in the order they would appear on a standard demand curve, starting from the point with the highest price and lowest quantity.
Linear vs. Non-Linear Demand Curves
Video Game Launch Pricing
Constructing a Supply Curve from Willingness to Accept (WTA)
Linearity of Supply and Demand Curves as a Simplification
Three firms produce a specific type of widget. Firm X will offer 40 widgets for sale at any price of $8 or higher. Firm Y will offer 60 widgets for sale at any price of $11 or higher. Firm Z will offer 50 widgets for sale at any price of $14 or higher. If the market price for a widget is currently $12, what is the total quantity of widgets supplied to the market?
Market Supply for Handcrafted Mugs
For a market of a specific good, match each economic event with its direct effect on that good's market supply curve.
An improvement in the technology used to produce a specific good, which lowers the cost of production for all potential sellers, will cause a movement up and to the right along that good's existing market supply curve.
Interpreting a Market Supply Schedule
Explaining the Upward Slope of the Supply Curve
Consider a market with three individuals, each selling one identical used laptop. Seller 1 is willing to sell their laptop for $250 or more. Seller 2 is willing to sell theirs for $300 or more. Seller 3 is willing to sell theirs for $350 or more. Based on this information, arrange the following statements to correctly describe the total number of laptops supplied to the market as the price increases.
The total quantity of a good offered for sale by all producers in a market is represented by the market supply curve, which is derived by horizontally summing the individual ___________ of each producer.
Producer's Supply Decision
A market for a specific type of bicycle consists of only two producers: 'Cycle Corp' and 'Bike Inc.'. The table below shows the quantity of bicycles each firm is willing and able to sell at various prices.
Price Cycle Corp Quantity Supplied Bike Inc. Quantity Supplied $200 5 0 $300 15 8 $400 25 16 Which of the following tables correctly represents the market supply schedule for this type of bicycle?
Inverse Supply Function
Deriving Market Supply by Aggregating Individual Firm Supplies
Learn After
Consider a market for a new, patented medication that is essential for a small group of patients with a rare disease, but is also a mild convenience for a much larger group of people with a common, non-critical condition. If the relationship between price and the number of units people are willing to buy is graphed, which of the following best describes the likely shape of the graph?
Analyzing a Non-Linear Supply Curve
The Reality Behind Linear Economic Models
In economic analysis, using a straight-line demand curve to model a market is always less accurate and therefore less useful than using a precisely measured, non-linear curve.
The Trade-offs of Simplified Economic Models
Analyze the following market descriptions. Match each description to the most likely shape of its corresponding supply curve, based on the implied distribution of production costs (willingness to accept).
Interpreting a Non-Linear Demand Curve
Consider a market for a specific good where nearly all potential consumers value the item at approximately the same price. If the market price were to drop just below this common valuation, a very large number of people would suddenly be willing to buy. Which of the following best describes the shape of the curve representing the relationship between price and the total quantity consumers are willing to buy?
Evaluating a Linear Demand Model for Public Transit
A city government uses a simple straight-line demand curve to predict the impact of a new tax on sugary drinks. In reality, the market consists of two main consumer groups: a large group of brand-loyal customers who are not very sensitive to price changes, and another large group of casual consumers who are very sensitive to price changes. Compared to the actual market outcome, the government's model using a straight-line curve will most likely: