(Solved) Price in theoretical and real world.

pl6

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3 years ago

What does the following statement, price would move to where it "should be" in both the theoretical and real world mean?

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bio_man

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Educator

3 years ago

Hi pl6

I'm assuming that you're using a model to predict the price of some good, and the statement is saying that based

I think you need to provide more details. What is the sentence before and after?

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pl6 Author

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3 years ago Edited: 3 years ago, pl6

Hi bio_man, sorry but what do you mean exactly? Because the question is asking what the statement actually means, or explain what it means/meant by that, I guess I could say that the actual statement from the question word for word, is, "in the theory world and the real world, price will move to where “it should be”. Does that help?

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bio_man

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Educator

3 years ago

Does it mean the market determines the price of goods based on people's wants and needs? Prices will balance out eventually once there's an equilibrium in supply and demand.

Not sure, very vague question.

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duddy

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pl6 Author

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3 years ago

Quote from: duddy (3 years ago)

Assume there is a new product on the market. As the inventor, you don't know what price point to give it. So the early adapters, pay a premium for whatever they feel it's worth. Once the initial supply is reduced, the price rises until more the product are made for the consumers that want it. Once all the consumers who wanted the product have it, the demand will decrease, prices will lower, until the next wave of consumers want it. Competition in this market will also occur, which will add pressure to price fluctuations and so on.

Would you know a real world example for this particular question?

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duddy

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Staff Member

3 years ago

Anything with an elastic demand, maybe an electronic device like a drone. If I think of anything better, I'll reply back

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- Master of Science in Biology
- Bachelor of Science

pl6 Author

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3 years ago

Alright, thanks Slight Smile

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pl6 Author

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3 years ago

would a fidget spinner be a good example? Since it was once to be very trendy and the demand for them became very high, which lead to higher prices. Once everyone had one, or had lost its trendiness, the demand for them became low and prices became as low as well.

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duddy

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3 years ago

👍 👍 👍

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- Master of Science in Biology
- Bachelor of Science

pl6 Author

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#10

3 years ago

Great! thanks Slight Smile

will mark solved

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