True demand is the actual uptake ability of the market. A town of 100 people where everyone eats one loaf of bread a day will be precisely 100 loaves of bread every day (for simplicity we’re not accounting for tourism and travelers etc.). If you bake 200 loaves, you’re left with 100, period. And if you raise the price so only 20 people can afford bread, well, the demand didn’t lower, the buying ability did.
And most economist falsely measure this latter buying ability as “demand”. Just because people can’t afford it, it doesn’t mean they don’t want it. In that aspect, demand is relatively stable.
I mean, but suppose the baker bakes 200 loaves of bread. Everyone buys their one loaf, the the baker has too much bread, and really, no where to store it. So they lower the price to 0 - literally free bread.
Well now, its free! So people come by and grab an extra loaf to make french toast the next morning. Or to feed to their cat to save money on cat food. And then someone realizes they can just put it in their composter to make free compost for their garden. With an infinite supply of free bread, soon people will figure out how to build their houses with it or turn it into vehicle fuel.
That’s not really how demand is measured, demand is a function of price and usually equilibrium is a matter of where demand and supplu meet (using the most basic models).
Producing 20 loaves could be the equilibrium point or 120 could dependant of what defines the supply line (based on material costs/labor).
I guess it depends on what you consider demand.
True demand is the actual uptake ability of the market. A town of 100 people where everyone eats one loaf of bread a day will be precisely 100 loaves of bread every day (for simplicity we’re not accounting for tourism and travelers etc.). If you bake 200 loaves, you’re left with 100, period. And if you raise the price so only 20 people can afford bread, well, the demand didn’t lower, the buying ability did.
And most economist falsely measure this latter buying ability as “demand”. Just because people can’t afford it, it doesn’t mean they don’t want it. In that aspect, demand is relatively stable.
I mean, but suppose the baker bakes 200 loaves of bread. Everyone buys their one loaf, the the baker has too much bread, and really, no where to store it. So they lower the price to 0 - literally free bread.
Well now, its free! So people come by and grab an extra loaf to make french toast the next morning. Or to feed to their cat to save money on cat food. And then someone realizes they can just put it in their composter to make free compost for their garden. With an infinite supply of free bread, soon people will figure out how to build their houses with it or turn it into vehicle fuel.
That’s not really how demand is measured, demand is a function of price and usually equilibrium is a matter of where demand and supplu meet (using the most basic models).
Producing 20 loaves could be the equilibrium point or 120 could dependant of what defines the supply line (based on material costs/labor).