A Change Of Perspective

Modern economics gets inspiration from thermodynamics, constantly looking for the equilibriums such systems demonstrate.

Multidimensional Economics has a different point of origin.

Consider the maps below and the three questions that follow.

Which two countries are these?

Where do they touch?

Why does it matter?

Look to the next post for the answers.

#demandforecasting #prices

Demand Frontiers Change – But Some Not By Much

Markets change.  Demand Frontiers depict the limits of markets to absorb products based on their prices to the quantities purchased.  While some markets change rapidly (cell phones, flatscreen televisions, computers, etc.), others, especially at their limits, are slow to respond.

The market for fighters and bombers is such a market.

At its Demand Frontier, this market has changed little in 20 years.  The constant over that period changed less than 2.5%, and the slope less than 1.0%.  (Note: The F-35A, shown in a previous post, once corrected for its revised 2016 values, fell off of the Frontier).

If a market’s Demand Frontier is stable over decades, what are the chances of vastly exceeding it?  Tune in to the next post for the answer.

#demand #demandforecasting #prices

Costs And Prices Both Move Down Over Time

In most markets outside of refining and mining, costs and prices move in the same direction – generally downward.

In the case of the Model T, this happened for nearly two decades. When prices exceed costs, we say the product is in Sustainable Disequilibrium.  When costs rise to and exceed prices, producers end the product line (Source, Abernathy, Product Dilemma, 1978, ISBN ISBN-13: 978-0801820816)

#prices #costs #sustainable #sustainable #disequilibrium

What was once $300, Now Costs $9.55

Product deflations are the opposite of upward-sloping supply curves. They are nowhere more obvious than in the market for flat-screen televisions.

Here are the equivalent buying powers for televisions over time, beginning at $300 in 2000. (Source: https://lnkd.in/gk97rVM) Processes improve, and people learn.

#supply #prices #learningcurve

What About Learning?

If costs rise as quantities increase in mining and refining, creating what classic economists call upward-sloping curves (see the last post), how do costs behave in other industries?

Let’s look.

Solar manufacturing costs have consistently fallen over time. This phenomenon, known as Swanson’s Law, observes that “at present rates, costs go down 75% about every ten years (https://lnkd.in/gYHnMDz The consistent drop in costs reflects the learning or experience curve, which observes the amount of time people take to complete tasks falls over time. In other words, people get smarter about how to get tasks done; the more often they do those tasks. The learning curve is one of the great omissions in modern economics. Where else can we find such curves?

#prices #supply #learning #learningcurve

Where Are All The Upward-Sloping Supply Curves?

In every current economics textbook, authors envision upward-sloping supply curves, where suppliers’ prices go up with increasing quantities.  I found an example of one here: (https://lnkd.in/ehA3aez), where the increasing costs from left to right by mine form such a curve.

Has anyone found such curves outside of mining and refining?

If so, please let me know.

Thanks,

#mining #refining #prices #supply #supplycurve