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Wednesday, June 27, 2007

Aargh!

Reading this article, I found:

"And then there is the related set of concerns: the emerging prospect that the world’s demand for oil will outstrip supply..."

(Bashes head on keyboard fifteen times.) Supply and demand are curves my friend, curves and one of them cannot "outstrip" the other. Furthermore, the quantity demanded and the quantity supplied will always match at the equilibrium price. The quantity demanded will always "outstrip" the quantity supplied at a price below equilibrium, and vice versa at a price above equilibrium. The sentence above means nothing more than, "The price of oil is likely to keep rising."

6 comments:

  1. Are they really curves, Gene? I don't want to bash my head on a keyboard or anything, but it seems you are being a bit imprecise while you are lecturing someone else on his sloppiness.

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  2. "The respective relations are called the 'supply curve' and 'demand curve', or 'supply' and 'demand' for short."
    http://en.wikipedia.org/wiki/Supply_and_demand

    My post is pretty much straight from Landsburg's Price Theory -- I'll find the direct quotes tomorrow when I'm near the book.

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  3. I once went to a strip club near the Berkeley economics department and saw Demand outrip Supply with my own eyes.

    It was a strip club for nerds, obviously, but still.

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  4. Gene,

    I think maybe you missed my (anal) point. The uberpurist Austrian view is that it makes no sense to talk of infinitesimal price changes and quantities, and so there really isn't a demand curve; at best there's a demand schedule, a collection of finite points.

    And why would quoting Landsburg matter? In your book you cite him as a great example of flawed thinking when it comes to price theory, right?

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  5. Bob, I basically agree: I've seen Kirzner's fantastic lecture on supply and demand curves two or three times. But I figured it's enough to educate this guy on standard economics -- at least if he gets that right, he won't say "supply will outstrip demand."

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    ReplyDelete