Quote from: anderxander on May 29, 2011, 09:12:40 PM

Then prove him wrong and calculate price by replacing the supply
and demand variables with numbers.

Calculate supply by replacing the price and demand variables with numbers.

Calculate demand by replacing the price and supply variables with numbers.

Use this graph for your calculations.

ingrimayne.com/econ/DemandSupply/Figure4.5.gif

P = Price, S = Supply, D = Demand

P + S = P + D
3.00 + S = 3.00 + 70
S = 3.00 - 3.00 + 70
S = 70

P + S = P + D
3.00 + 70 = 3.00 + D
3.00 - 3.00 + 70 = D
70 = D

P + S = P + D
P + 70 = P + 70
P - P = 70 - 70
0 = 0

Ok, he's wrong.

~~Price can't be determined alone, which is why it cancels out.~~ Since price is determined by both the buyer(demand) and the seller(supply), it will be 0 when both buyer and seller agree on a price, like in the graph. Otherwise it will be the difference between the buyer and seller's asking prices. That's where supply and demand come in. A lower supply influences the seller to ask for a higher price, a higher price influences the buyer to have lower demand. The three components work together.

Edited: May 30, 2011, 05:44:37 pm