It seems this simple fact requires further explanation for someOriginally Posted by SAT
As on can see a fall in demand represented in the diagram by a shift in the demand curve from right to left (D2 - D1) results in a reduction in the amount of the product purchased and so a reduction in consumption from Q2 to Q1 as only those prepared to pay the lower price of P1 where the new demand line intersects the supply line will consume the product.
Thats it.As you can see on the graph a change in price only shifts the point on the demand curve (D1 or D2) up or down or changing the quantity demanded (Q1 or Q2).Changing demand actually shifts the curve.
[quote=sharper;2404929]sharperYou don't appear to have understood the analogy I was making at all. I was not asserting oil is "the Ferrari of energy sources" I was providing it as an example of something many people want but cannot afford thus they don't count as economic demand. Supply and demand for products and services are not absolutes, they're very different at different price levels with oil being no different. Demand for oil at say $10 would be enormous, at $1000 it would be non-existent.
Consequently economic demand (i.e. the price people are willing to pay for something) can fall with no change in the amount transacted whatsoever.
I dont think I misunderstood your anology, I maybe did not make myself clear in my response, up to very recently Oil was the only game in town, renewable energy, as a commercial entity, is the result of the oil shocks in the 70' and 80's, that was the warning signal that oil will not last forever. At this point in time onshore wind energy is cheaper to produce than electricity from any hydrocarbon source, another few years and the same will be true for off shore wind and oceanic energy, it is not a coincidence that oil companies and oil producing countries are the largest investors in renewables in the developed world.
It can't be done, much easier to for the oil producers to raise their prices to their other customers, pharma and plastics.No I don't assume that at all. Oil demand is presently inelastic due to people having no choice but to buy it. In the presence of viable energy alternatives oil demand would become elastic meaning oil companies would either have to find ways to provide it cheaply (and they seem to make plenty of profit at current price levels) or cease to exist.
Regards, Pat Gill
Yes...but the demand curve itself is actually just a graphic depiction of how much people (in aggregate) will buy at a particular price. "Changing the demand curve" is a case of changing how much people will buy at such and such a price (and conditions).
Never let the best be the enemy of the good.
Sorry but your missing the point.Shifting the demand curve left or right represents a change in demand.Changing the price only shifts the quantity demanded.You are selling ice creams for 1 and you sell 5, if you raise the price you will only sell 2.You have changed the quantity demanded, not the demand.If we have a heatwave demand will go up, the demand curve will shift and you will sell 5 again at the same higher price.Demand is not dependent on price, only quantity demanded.First year economics.
And if in that heatwave, a more efficient ice cream vendor can afford and continues to sell ice cream at the lower price, he will supply the extra quantity and if the heatwave is extended the original vendor soon finds a new occupation.
Regards, Pat Gill
That's capitalism for ya.
Actually, the problem is that it is "first year economics". In real economies, the price does change the demand schedule, by (for example) stimulating efficiency research, which changes the schedule. Forecasting changes in the energy market, that's a rather important factor.
The problem is one of using too simple a model rather than being wrong about what demand means.
Never let the best be the enemy of the good.
That reminds me of an old marketing joke - A hairdresser charging $20 has competition open right across the street offering $2 dollar haircuts. The first hairdresser continues to charge $20 and displays a sign saying "We fix $2 haircuts"
No ibis the problem is you trying to make a very simple concept complicated.Before you do that I suggest you look at an introduction to microeconomics book.Doesn't matter how you spin it 1+1=2
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