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ECONOMIC SUPPLY & DEMAND - MIT OpenCourseWare

D-4388 1 ECONOMIC SUPPLY & DEMAND by Joseph Whelan Kamil Msefer Prepared for the MIT System Dynamics in Education Project Under the Supervision of Professor Jay W. Forrester January 14, 1996 Copyright 1994 by MIT Permission granted to copy for non-commercial educational purposes 5 D-4388 3 Table of Contents 1. ABSTRACT 4 2. INTRODUCTION3. CONVENTIONAL SUPPLY AND DEMAND INTRODUCTION 6 DEMAND 6 SUPPLY 8 INTERACTION BETWEEN SUPPLY AND DEMAND 9 4. A SYSTEM DYNAMICS APPROACH TO SUPPLY AND DEMAND 12 INTRODUCTION 12 DEMAND 13 SUPPLY 15 INTERACTION BETWEEN SUPPLY AND DEMAND 18 5. TESTING THE MODEL 20 INCREASE IN DEMAND 21 DESIRED INVENTORY COVERAGE 23 PRICE CHANGE DELAY 24 FURTHER EXPLORATION 26 6.

This section deals with supply and demand as sometimes taught in high-school economics classes. The following descriptions of supply and demand assume a perfectly competitive market, rational consumers, and free entry and exit into the market. Economists also make the simplification that all factors other than price which affect the

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