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Demand is XXX and supply is YYY and a price is found equaling ZZZ. Now lets suppose

cohodkcohodk Posts: 19,155 ✭✭✭✭✭
Demand is XXX and supply is YYY and a price is found equaling ZZZ. Now lets suppose something happens to either demand or supply and the price falls to UUU. If conditions return to where demand is again XXX and supply is YYY, will the price then return to ZZZ?


Excuses are tools of the ignorant

Knowledge is the enemy of fear

Comments

  • derrybderryb Posts: 36,839 ✭✭✭✭✭
    Nope, not when the value of what item is being priced in (dollars for example) is changing. Inflating (or deflating) the money supply will in turn inflate (or deflate) price given all other things remain unchanged. Price equilibrium (the intersecting point in the graph) may not change but the value assigned to it (left colum) will change as dollar supply changes. More dollars chasing same number of items by the same number of buyers will result in higher prices - this is what price inflation is all about.

    image

    Natural forces of supply and demand are the best regulators on earth.

  • ranshdowranshdow Posts: 1,442 ✭✭✭✭
    Intuitively I don't believe so, but I can't explain why.
  • BaleyBaley Posts: 22,661 ✭✭✭✭✭
    Maybe yes, maybe higher, maybe lower..

    maybe the answer depends on the values of variables AAA-TTT

    Liberty: Parent of Science & Industry

  • bidaskbidask Posts: 14,017 ✭✭✭✭✭


    << <i>Demand is XXX and supply is YYY and a price is found equaling ZZZ. Now lets suppose something happens to either demand or supply and the price falls to UUU. If conditions return to where demand is again XXX and supply is YYY, will the price then return to ZZZ? >>

    Sure it can return to price ZZZ and easily go higher.
    I manage money. I earn money. I save money .
    I give away money. I collect money.
    I don’t love money . I do love the Lord God.




  • DrBusterDrBuster Posts: 5,394 ✭✭✭✭✭
    If the price falls then demand stinks or the supply brings the flavor. The equilibrium of the math should remain the constant....all things science equal that is...
  • TwoSides2aCoinTwoSides2aCoin Posts: 44,307 ✭✭✭✭✭
    Would it matter if demand were YYY and supply were XXX and the price stayed image

    image or not zzz
  • ebaytraderebaytrader Posts: 3,312 ✭✭✭


    << <i>If the price falls then demand stinks or the supply brings the flavor. The equilibrium of the math should remain the constant....all things science equal that is... >>



    Yes, all other things being static in a free market then in this hypothesis the price will reach that equilibrium again.
  • s4nys4ny Posts: 1,569 ✭✭✭
    It depends on the expectation of future demand. Look at the price of oil in 2008.

    "Money is made by anticipating the anticipators." The price action in the new gold Kennedy coins is
    an excellent example.


  • MGLICKERMGLICKER Posts: 7,995 ✭✭✭
    Are you basing supply and demand on stable pricing or in a loose or tight monetary environment.

    Selling a coin at auction on Ebay for example, demand will always meet supply, question is at what price? 90% silver bullion will always find a buyer, whether at 10x spot or 40x spot, so in that regard demand is always stable.
  • Steve27Steve27 Posts: 13,274 ✭✭✭
    Yes, but if during the price fall, additional buyers enter the picture, which is what causes the demand to return, it's possible the price will go higher than ZZZ.
    "It's far easier to fight for principles, than to live up to them." Adlai Stevenson
  • rawteam1rawteam1 Posts: 2,472 ✭✭✭


    << <i>Yes, but if during the price fall, additional buyers enter the picture, which is what causes the demand to return, it's possible the price will go higher than ZZZ. >>



    ?????????????????????????????
    keceph `anah
  • cohodkcohodk Posts: 19,155 ✭✭✭✭✭
    Most correct answer, IMO, goes to Baley with a nod to Ranshdow for thinking outside the box. Those that said "yes" and supported the idea with inflation expectations may also have some merit, but via default, as all prices will rise with inflation.

    My idea is that during bull or bear manias price discovery is highly influenced by emotion. Prices at any given equilibrium point will often be higher/lower than "normal" due to emotional factors such as greed and fear. Expectations of still higher prices entice investors to pay higher prices than might be discovered absent emotion. I believe prices do not necessarily return to highs/lows even if the supply/demand equation is equal to previous conditions.

    So in short, typically, greater demand (or greater imbalance in supply/demand ratio) is required to reach prices that had been previously realized.
    Excuses are tools of the ignorant

    Knowledge is the enemy of fear

  • TwoSides2aCoinTwoSides2aCoin Posts: 44,307 ✭✭✭✭✭
    There are a lot of equations. However margins are the same with the exception of fear, greed, supply and demand, which are always present. So in essence, if I'm reading your equation right, then when there is greater demand there is more greed and higher margins and strained supplies. Where there is greater fear there is greater supply with little demand and smaller margins.

    Or something like that. image
  • derrybderryb Posts: 36,839 ✭✭✭✭✭
    The price equilibrium point is nothing more than where the two parties (suppliers and demanders) both think they are getting the best deal. It does not matter if it is an investment (speculation) or a consumer good. "Emotion" can drive demand or supply higher/lower. Supply and Demand are what determine price. Anything else, while it may influence supply or demand does not determine price. Fear of a water shortage does not drive the price of water higher. The price of water is driven higher by buyers who act on that fear by meeting a higher ASKING price with an actual PAID price.

    Natural forces of supply and demand are the best regulators on earth.

  • rawteam1rawteam1 Posts: 2,472 ✭✭✭


    << <i>The price equilibrium point is nothing more than where the two parties (suppliers and demanders) both think they are getting the best deal. It does not matter if it is an investment (speculation) or a consumer good. "Emotion" can drive demand or supply higher/lower. Supply and Demand are what determine price. Anything else, while it may influence supply or demand does not determine price. Fear of a water shortage does not drive the price of water higher. The price of water is driven higher by buyers who act on that fear by meeting a higher ASKING price with an actual PAID price. >>


    I would submit that this is not true, vis a vis, every gas station would have same exact prices per gallon , for all 3 types, and when is the last time you have seen an auction price of exact 2 coins have exact same price?,.... Amongst a host of other examples I'm sure...
    keceph `anah
  • derrybderryb Posts: 36,839 ✭✭✭✭✭


    << <i>

    << <i>The price equilibrium point is nothing more than where the two parties (suppliers and demanders) both think they are getting the best deal. It does not matter if it is an investment (speculation) or a consumer good. "Emotion" can drive demand or supply higher/lower. Supply and Demand are what determine price. Anything else, while it may influence supply or demand does not determine price. Fear of a water shortage does not drive the price of water higher. The price of water is driven higher by buyers who act on that fear by meeting a higher ASKING price with an actual PAID price. >>


    I would submit that this is not true, vis a vis, every gas station would have same exact prices per gallon , for all 3 types, and when is the last time you have seen an auction price of exact 2 coins have exact same price?,.... Amongst a host of other examples I'm sure... >>


    Demand for gasoline varies with location depending on whether the buyer is willing to drive elswhere for cheaper gas. A good example is higher gas prices near an airport where people are returning rental cars that must first be topped off. A buyer who paid a tad more for a coin either saw a difference in the coin or the seller or was not aware the "same" coin was available cheaper. In all cases it boils down to demand and the willingness of the buyer to pay more, whatever his reason for doing so. Would you pay a little more for a coin because you trusted the seller more than the cheaper seller. Would you pay a little more for gasoline because you were afraid of running out before you could make it to a cheaper location? Regardless of what we pay and why we pay, supply and demand determine each and every price paid. Supply and demand will vary between sellers, or buyers, of identical items - this is why prices for the same item will vary. Each completed transaction stands on its own supply and demand variables. An excellent case study for the laws of supply and demand is the current JFK gold coin.

    Natural forces of supply and demand are the best regulators on earth.

  • rawteam1rawteam1 Posts: 2,472 ✭✭✭
    all iknow is demand for eagles went sky high, and price went subterranean...
    keceph `anah
  • derrybderryb Posts: 36,839 ✭✭✭✭✭


    << <i>all iknow is demand for eagles went sky high, and price went subterranean... >>


    Could it be because the supply of paper eagles was greatly increased. image

    Natural forces of supply and demand are the best regulators on earth.

  • bidaskbidask Posts: 14,017 ✭✭✭✭✭


    << <i>

    << <i>Demand is XXX and supply is YYY and a price is found equaling ZZZ. Now lets suppose something happens to either demand or supply and the price falls to UUU. If conditions return to where demand is again XXX and supply is YYY, will the price then return to ZZZ? >>

    Sure it can return to price ZZZ and easily go higher. >>

    The OP never said what ZZZ is but I'm thinking it could be a stock price.

    Think price to earnings ratios.

    A company may experience a scenario the OP laid out relative to the good or service it produces.

    But the stock price could be considerably higher.

    I manage money. I earn money. I save money .
    I give away money. I collect money.
    I don’t love money . I do love the Lord God.




  • cohodkcohodk Posts: 19,155 ✭✭✭✭✭
    Fear of a water shortage does not drive the price of water higher. The price of water is driven higher by buyers who act on that fear by meeting a higher ASKING price with an actual PAID price


    Which is much higher than if there was no fear of a shortage, right?

    Emotion drove the price higher than it should have been. Thanks for supporting my idea. imageimage
    Excuses are tools of the ignorant

    Knowledge is the enemy of fear

  • rawteam1rawteam1 Posts: 2,472 ✭✭✭


    << <i> Fear of a water shortage does not drive the price of water higher. The price of water is driven higher by buyers who act on that fear by meeting a higher ASKING price with an actual PAID price


    Which is much higher than if there was no fear of a shortage, right? >>


    So that's y bottled water at the gas station costs so much??? Lol...
    keceph `anah
  • derrybderryb Posts: 36,839 ✭✭✭✭✭


    << <i> Fear of a water shortage does not drive the price of water higher. The price of water is driven higher by buyers who act on that fear by meeting a higher ASKING price with an actual PAID price


    Which is much higher than if there was no fear of a shortage, right?

    Emotion drove the price higher than it should have been. Thanks for supporting my idea. imageimage >>


    emotion drove the demand higher. image

    Natural forces of supply and demand are the best regulators on earth.

  • cohodkcohodk Posts: 19,155 ✭✭✭✭✭


    << <i>

    << <i> Fear of a water shortage does not drive the price of water higher. The price of water is driven higher by buyers who act on that fear by meeting a higher ASKING price with an actual PAID price


    Which is much higher than if there was no fear of a shortage, right?

    Emotion drove the price higher than it should have been. Thanks for supporting my idea. imageimage >>


    emotion drove the demand higher. image >>




    In your example, the higher price was a result of suppliers asking more, not due to increased demand.
    Excuses are tools of the ignorant

    Knowledge is the enemy of fear

  • derrybderryb Posts: 36,839 ✭✭✭✭✭


    << <i>

    << <i>

    << <i> Fear of a water shortage does not drive the price of water higher. The price of water is driven higher by buyers who act on that fear by meeting a higher ASKING price with an actual PAID price


    Which is much higher than if there was no fear of a shortage, right?

    Emotion drove the price higher than it should have been. Thanks for supporting my idea. imageimage >>


    emotion drove the demand higher. image >>




    In your example, the higher price was a result of suppliers asking more, not due to increased demand. >>


    Price equilibrium is not determined by what is bid or what is asked. It is the point where price is agreed upon by the two parties.

    Natural forces of supply and demand are the best regulators on earth.

  • cohodkcohodk Posts: 19,155 ✭✭✭✭✭
    Agreed. That price is heavily influenced by emotion. Bull and bear manias are based on emotion. This is why equilibrium price will always be higher during a bull mania and why there needs to be a greater imbalance in supply/demand the next time prices approach those bull mania prices because emotion will play a much lesser role.
    Excuses are tools of the ignorant

    Knowledge is the enemy of fear

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