Supply & Demand … and those axes

From about a decade ago, but this topic never loses its interest!

Who invented Supply and Demand? (Mankiw’s blog)

How about that Antoine Augustine Cournot! And then there’s the independent / dependent variable controversy. It’s so easy to explain while teaching. Here are a few of the explanations.

  • Clearing the market of a certain quantity requires a price.
  • There are plenty of times where the vertical axes is clearly the dependent variable. For instance, cost curves: What’s the marginal or (some flavor of) average cost of producing a given quantity?
  • Much of the time, both axes are both independent and dependent variables. We’re back to Cournot, with reaction curves in duopoly. Either quantities or (differentiated products’) prices.

Read the linked Richmond Fed article for more in-depth consideration.

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