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Economics explained of "THE BIG ONE"
NewParadigm
Posts: 1,322
Here it is. The economic explanation of why our coins will be worth less - luckily, there is a space between "worth" and "less."
Below, this is a diagram that illustrates the equilibium between supply and demand before "the big one." "S" is the supply curve. This shows as as the price of the coins (or any item in the world) increase, people who own the coin or item will be more inclined to sell it in the market (vice versa). "D" is the demand curve. This shows that, at a low price, the demand curve starts high and decreases as the price increases. This is from the point of view from the buyer.
The next chart, simply, shows that rarity and grade are related. Rarity and price can be substituted.
Here we go: "The Big One" happened. S1 intersects at D and that was the out equilibrium, where buyers and sellers met on the agreed market price. NOW, the big one has more coins at a higher grade. This lowers the value of coins that are graded above (or below) the "+" due to more supply. THUS, the Supply curve shifts to the right, indicating more supply, while demand is constant (there may be more demand for the + coins, but not for the coin market). The new equilibrium is where S2 and D intersect, showing that there are higher grades (quantity of higher grades) and the intersection is at a lower price.
If NOTHING changes, our coins are devalued.
In order to preserve the value of the coins, one of the two solutions below MUST happen.
The first is that there is an INSTANT flood of NEW buyers. I am not saying some people join, the demand needs to increase SIGNIFICANTLY. If this happens, then the coins wont be devalued - there would be more buyers to sponge up the old coins. Since S1 shifted to the right to S2 (higher quantity of higher graded coins), D1 needs to shifts to D2. The new equilibrium is where S2 and D2 meet. The additional demand compensated for the increase quantity.
OR, there needs to be "down grades" of a proportion to upgrades 2.25:1. So a if there are 10 new +'s, there needs to be 22.5 downgrades to maintain the old price. The reason for the 2.25 ratio is that the MS70 ceiling in a closes that the grade floor, so additional consideration needs to b e applied to the downside.
That said, since S1 shifted to S2, they need to downgrade coins to soak up the excess quantity of higher grade coins, so the supply curve shifts to S3. When thy average out, S1 become the new and old average, preserving the old equilibrium.
Below, this is a diagram that illustrates the equilibium between supply and demand before "the big one." "S" is the supply curve. This shows as as the price of the coins (or any item in the world) increase, people who own the coin or item will be more inclined to sell it in the market (vice versa). "D" is the demand curve. This shows that, at a low price, the demand curve starts high and decreases as the price increases. This is from the point of view from the buyer.
The next chart, simply, shows that rarity and grade are related. Rarity and price can be substituted.
Here we go: "The Big One" happened. S1 intersects at D and that was the out equilibrium, where buyers and sellers met on the agreed market price. NOW, the big one has more coins at a higher grade. This lowers the value of coins that are graded above (or below) the "+" due to more supply. THUS, the Supply curve shifts to the right, indicating more supply, while demand is constant (there may be more demand for the + coins, but not for the coin market). The new equilibrium is where S2 and D intersect, showing that there are higher grades (quantity of higher grades) and the intersection is at a lower price.
If NOTHING changes, our coins are devalued.
In order to preserve the value of the coins, one of the two solutions below MUST happen.
The first is that there is an INSTANT flood of NEW buyers. I am not saying some people join, the demand needs to increase SIGNIFICANTLY. If this happens, then the coins wont be devalued - there would be more buyers to sponge up the old coins. Since S1 shifted to the right to S2 (higher quantity of higher graded coins), D1 needs to shifts to D2. The new equilibrium is where S2 and D2 meet. The additional demand compensated for the increase quantity.
OR, there needs to be "down grades" of a proportion to upgrades 2.25:1. So a if there are 10 new +'s, there needs to be 22.5 downgrades to maintain the old price. The reason for the 2.25 ratio is that the MS70 ceiling in a closes that the grade floor, so additional consideration needs to b e applied to the downside.
That said, since S1 shifted to S2, they need to downgrade coins to soak up the excess quantity of higher grade coins, so the supply curve shifts to S3. When thy average out, S1 become the new and old average, preserving the old equilibrium.
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coinsarefun, marmac, LindeDad, andree, robkool, TwoSides2aCoin, waterzooey, agentjim007
All were A++++ Transactions- Thank you !