Having in mind that the demand curve express the highest price that the consumers are willing to pay for the last good available for a given quantity, and the supply curve express the lowest amount of money that producers are willing to accept for the last peace available at a given quantity then:
-why don't neither consumers nor producers abuse that by:
a) consumers buying exactly at the supply curve (until equilibrium)?
b) producers sell exactly at the demand curve (until equilibrium)?
Having in mind that the both parties are driven by their self-interest, in the both cases described above they can realize either an enormous profit or to save a lot of money.
2 Answers | Add Yours
The basic answer here is that consumers as a group do not coordinate their actions. Neither do suppliers. Therefore, it is not really possible for what you describe to happen.
As I understand it, you are suggesting that consumers only buy a very small number of items because at a low number of items the sellers will be willing to sell them at a low price. Alternatively, you are suggesting that suppliers should sell only a small number of the item because they know that consumers will buy a few of them at that high of a price.
The problem here is that the consumers and producers will not agree on how to behave. If the producers set the price very low, all consumers will want to buy the item. They will not all agree to only let a few people buy them at the low price. Imagine, for example, if iPhones went on sale for $50. You would not be able to convince only a few customers to go and buy. Everyone would want to buy and the price would go up.
So, the idea that you have put forth depends on a situation where consumers could and would coordinate their efforts. This will not happen in the real world.
This was the answer I was looking for. Very helpful, thank you for the effort! :)
The simplest answer is that the average consumer is unaware of demand curve function and producers are aware.
We’ve answered 302,640 questions. We can answer yours, too.Ask a question