View Single Post
10-23-2009   #32 (permalink)
sentythee
ggFTW Stalker
 
Join Date: Jul 2007
Location: In reckless abandon, I follow the Turtle.
Posts: 522
iTrader: (0)
sentythee is just really nicesentythee is just really nicesentythee is just really nicesentythee is just really nice
Guild: Titans
Default

No market is perfectly competitive >>
It's valid to use perfect competition as an assumption for theories, but only when the theories actually make sense in the context they're being applied to.

You probably didn't see this because I added it to my last post right before you posted.
Quote:
If economics did work as your last graph says, increase in demand --> increase in price --> increase in suppliers --> decrease in price, then every increase in demand would lead to a constant price and an increase in quantity exchanged.

Following the same idea for a decrease in demand:
Decrease in demand --> decrease in price --> decrease in suppliers --> increase in price, then every decrease in demand would lead to a constant price and a decrease in quantity exchanged.

From the above two, it follows that price is constant regardless of any change in demand, which is just false.
I'm assuming that the final price is equal to the initial price, as your graph shows.
__________________