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Econlib QuickPicks- Supply and Demand

Welcome to Econlib QuickPicks!

There's an old economics joke, generally attributed to satirist Thomas Carlyle that might have been the inspiration behind this month's QuickPicks. It goes something like this.. It’s easy to train economists. Just teach a parrot to say ‘Supply and Demand’.

We know there's more to it than that. As EconTalk host Russ Roberts says about the role of supply and demand in generating prices, "For me the role of prices in steering information and allocating resources is one of those ideas. It’s a very deep idea." A deep idea that deserves further exploration, and indeed, perhaps a lifetime of study.

We hope you find this month's collection useful. We'd love to get your feedback. Stories, photos, and anecdotes are always welcome. Please let us know at econlib@libertyfund.org.

(By the way, we'd love to know what future QuickPicks topics you'd like to see. Drop us a line with your suggestions today.)

Concise Encyclopedia: Supply
The law of supply states that the quantity of a good supplied (i.e., the amount owners or producers offer for sale) rises as the market price rises, and falls as the price falls. Economists do not reallyhave a “law” of supply, though they talk and write as though they do.

Where do Prices Come From?

Prices adjust to equate how much people want to buy with how much they want to sell... And if people want to buy more than they did before, prices rise. If people want to sell more than they did before, prices fall... Supply and demand. Buyers are competing with each other. Sellers are competing with each other.

For Discussion: All the World's a Puzzle
The “economic way of thinking” is something we at Econlib emphasize…a LOT. In this podcast, EconTalk host Russ Roberts sat down again with “the Economic Naturalist, Cornell’S Robert Frank.They explored some puzzles, what Roberts calls “dinner table economics,” such as why do brides buy their gowns, while grooms rent their tuxes.

Concise Encyclopedia: Demand
The most famous law in economics, and the one economists are most sure of, is the law of demand. On this law is built almost the whole edifice of economics. The law of demand states that when the price of a good rises, the amount demanded falls, and when the price falls, the amount demanded rises.

Biography: Alfred Marshall
In his most important book, Principles of Economics,Marshall emphasized that the price and output of a good are determined by both supply and demand: the two curves are like scissor blades that intersect at equilibrium. Modern economists trying to understand why the price of a good changes still start by looking for factors that may have shifted demand or supply, an approach they owe to Marshall.

Going Further: Elasticity and its Expansion
Elasticity in general, and price elasticity of demand in particular, allow economic agents to get a firmer grasp of the actions they should take to improve the economic outcomes that affect them. Classical economists were well aware of basic principle underlying elasticity, but they lacked a vocabulary for discussing it in a unit-free way that was not specific to the market under investigation.

High School Economics Topics: Markets and Prices

Prices play a central role in the efficiency story. Producers and consumers rely on prices as signals of the cost of making substitution decisions at the margin. How are prices determined?

EconTalk Extra: Russ Roberts on the Role of Prices
the role of prices in supply and demand is just the beginning. Of course it doesn’t work perfectly except in textbooks. But what do we know about when it works better and when it works less well?

Video: The Free Market
"Man is an animal that bargains," said Adam Smith. Our commercial interactions help us further our individual interests and civilize us at the same time. This is a great video from AdamSmithWorks, with accompanying discussion questions, with your students.

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