why a linear fucyion may not be adequate for describing the supply and demand fuctions?

- anonymous

why a linear fucyion may not be adequate for describing the supply and demand fuctions?

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- jamiebookeater

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- amistre64

lol.... becasue most people are slewed ;)

- amistre64

skewed... ruined a perfectly good bit with a typo...

- amistre64

the economies of scale is a good reason; it is not linear and it affects supply and demand

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- amistre64

keynesian economics says that the supply curve is linear and then bends up at the Nrgdp

- anonymous

Linear with respect to what?

- amistre64

linear with respect to supply and demand :)

- amistre64

the demand curve has an inverse relation; and the supply curve has a direct relation; demand increases as price drops and supply increases as prices rise; the point where demand price = supply price is the market price

- amistre64

but economies of scale mean that the price for one item differs with respect to the amount of item being sold; due to the effective use of resources to lower price by quantity

- amistre64

there can also be a max or min at which the curves turn back on themselves and its refered to as laffers curve

- anonymous

Laffers curve refers to tax revenue rates.

- amistre64

tax rates follow a laffer curve; but laffers curve is a generality of many circumstances

- anonymous

Explain how it relates to supply, demand, and price.

- amistre64

lol.... laffers curve is its own explanation; its the relation of price to demand; whether that demand is a supply or a 'demand' there are limits to how many how much and how often we will tolerate things

- anonymous

Laffers curve says that tax rate zero, you collect zero, and at 100% you collect zero, so since it's a continuous function there's a max in between. Is there any supply, price, or demand range that runs from 0% to 100%?

- amistre64

laffers curve is a description of human behavioural outputs given circumstances; it isnt a set in stone device ..

- amistre64

tax rates are a model of laffers curve; not the result of it.... casue and effect..cause and effect

- anonymous

Tax rates are an input to Laffer's curve. They run from 0% to 100%. If you haven't any such range for some variable, you haven't anything that resembles a Laffer curve. There was a Mr. Laffer, and he was specific.

- amistre64

if im wrong about the laffer than im wrong.... but that doesnt change the answer that human behaviour itself is not linear and therefore a linear representation for supply and demand is not always adequat

- amistre64

laffers curve demonstrates the human behaviour is not linear lol

- anonymous

I'm trying to figure out anything remotely close to linear with respect to supply, demand, and price.

- amistre64

the natural Rgdp is a vertical line in the long run supply curve ;)

- anonymous

Rgdp is not familiar to me.

- amistre64

the supply curve modeled by keynesian is horizontal at points to indicate the inelasticity of price to drop

- amistre64

real gross domestic production

- amistre64

at natural Rgdp you are producing as much as you can with the resources available...

- amistre64

supply can only be a vertical representation then; the short run supply curve is skewed, but eventually settles into the long run

- amistre64

if we are producing/supplying all we can ; then a raise in price doesnt equal a raise in supply ..

- amistre64

if we do happen across a situtation where we can become more efficient in the supply; then we can lean into an inflationary condition during the short run...

- anonymous

This is a math forum. A vertical line approached asymptotically does not make the function that approaches it linear. Anything but.

- amistre64

a vertical line is a line lol; its called x = Nrgdp

- amistre64

the slope of the line is undefined; but the line exists

- anonymous

Not all lines represent linear functions. This one doesn't.

- amistre64

well, if we want to get technical about the term 'function' then id have to agree ;)

- anonymous

This whole discussion has to do with some linear function connecting supply, demand, and price in some fashion. I don't see any description that looks anything like a linear function.

- anonymous

So my response to the long-ago question would be, what exactly is the function you're hoping to represent linearly? I haven't heard that yet.

- amistre64

i interpret it as "why is a linear function not good to represent a supply or a demand curve". To wit; becasue human behavior is not linear.

- amistre64

Since human behaviour controls supply and demand; then a linear representation is not gonna be accurate/adequate depending on the amount of precision you wish to find

- anonymous

Do you teach economics somewhere? You spelling suggests you are not in the United States.

- amistre64

teach? nah.... I just finished up a macroeconomics course in college last semester tho... even got an 'A' somehow :)
and im actually in the us :) typing and spelling are not the same brain activity for me .... even tho I got an 'A' in typing too..40 wpm

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