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by aerhardt
19 days ago
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Classical supply and demand models do not show that increasing the price of x causes quantities to first go up then down after a certain inflection point… You could probably make the relationship through utility rather or a proxy model (you can model anything with enough imagination in economics) but to call it “the result of” as if it is immediately related is not accurate. It is apparent at first sight when you compare the curves… |
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If I raise the price of my product, less people will buy it but I'll make more profit per-unit -- so the amount of money I make is an inverted U with price on the x axis and money on the y axis, and I should set the price at the inflection point.