Macro Economics: Supply and Demand and Such
This is almost a followup to the earlier post on inflation , but at times I'll be neglecting some of the complications I mentioned earlier. If I were a paid teacher I'd feel embarrassed about my pedagogy here, but as I'm just a blogger I'll shrug and move on. When you read in the news that the price of, say, hats has gone up recently do you have any reason to think that there were more or less hats sold recently? You might think about an individual store raising its prices, resulting in less sales, but things like that seldom happen with a general prices level. Generally, there are going to be two possible explanations. It might be that hats suddenly became much more fashionable, and everyone wanted one. Since people are willing to pay more for hats, shop owners will charge more - and the higher hat prices will cause people to produce more hats too (demand has risen). Or it might be that a horrible felt plague has killed off all the felt plants and now the poor