- Cafe Hayek - http://cafehayek.com -
The mystery of supply and demand
Posted By Russ Roberts On September 24, 2009 @ 4:21 am In Complexity & Emergence,Education,Uncategorized | Comments Disabled
The paradox of markets is this: there is no single price even for apparently homogenous products, yet transactions by others, buying and selling similar goods, affect the price I pay or can charge. An extreme version of this is that every house is unique, yet as a seller of a house, I am not free to charge whatever I want. The price I ultimately receive when I sell my house may have something to do with my bargaining skills and my charm. But I am greatly constrained by what “similar” houses are selling for in “similar” neighborhoods. Supply and demand is the most powerful way to capture that relationship between transactions, even though it presumes, unrealistically, that there is a single price for a particular good.
Here  is my essay on this issues.
And here  is my attempt to take the insights of Hayek and put them into a supply and demand framework. For me, this helped me understand Hayek and enriched supply and demand.
Teachers and students of Principles or Intermediate Micro should feel free to use both of these pieces.
Article printed from Cafe Hayek: http://cafehayek.com
URL to article: http://cafehayek.com/2009/09/the-mystery-of-supply-and-demand.html
URLs in this post:
 Here: http://www.econlib.org/library/Columns/y2007/Robertsprices.html
 here: http://www.invisibleheart.com/HowMarketsUseKnowledge.pdf
 Image: http://www.blinklist.com/index.php?Action=Blink/addblink.php&Url=http%3A%2F%2Fcafehayek.com%2F2009%2F09%2Fthe-mystery-of-supply-and-demand.html&Title=The%20mystery%20of%20supply%20and%20demand
 Tweet: https://twitter.com/share
Copyright © 2011 CafeHayek.com. All rights reserved.