Supply and Demand

price goes up as supply goes down

think of it like a rare pokemon card

The best answer is that as supply goes down, price goes up.

If you and your competition have 1,000 items and 500 customers, you have to lower prices to incentivise customers to buy your over someone else's. If you and your comp have 100 items and 500 customers, then if a customer wants to get one the have to be will ing to pay more than everyone else in order to get it. Prices are rarely ever set by you, they are set (theoretically) by your competition and customers.

>>1755138
Supply is the supply of every firm on the market not just your firm. Also in the simple two line model they show you it is assumed that it is a competitive market so you changing the price is irrelevant as all the goods are the same. Only monopolies can set prices on their products. If for example some technology change increases the amount of tomatoes all firms can produce, this is a increase in supply that reduces the price as they are easier to make and more numerous. If all the crops get wiped out that is a reduction in overall supply and firms must take a higher price to remain in business.

No the tax's burden is split between the consumer and the producer. The producer raises the price some fraction which is given to the consumer, further a lower quantity of goods is produced because the tax raised the equilibrium price. This lower quantity of goods available to consumers has caused a loss of wealth in society.

>>1755138
lol do they just let any idiot into college these days?

no wonder a bachelors aint worth anyone anymore

>>1755138
>Also, a tax question. If a business sees that income taxes go up, they would have to lower prices to not lose customers that now have less money. So the consumer loses money to taxes, but 'gains' money when stores mark down prices. So wouldn't raising taxes help the overall economy if you lose money, but the power of your money goes up?

Taxes are a very complex issue and you can't generalise statements like that. It's not a closed system, e.g. what does the government do with the increased revenue through the higher income tax? If the increase spending in the local economy it might just be a net neutral.