25 | Economic Science: Putting Theory to the Test
In a laboratory experiment, as in real life, price controls—floors and ceilings—prevent buyers and sellers from sending each other a signal.
Francis Galston came upon an opportunity to test how well regular people were at answering a question. He was at a fair where lots of people were guessing the weight of an ox. What he found shocked him. The average of their guesses was almost exactly accurate. The crowd was off by just one pound.
You are about to participate in an economic experiment. The market structure used in this experiment is known as a “double-oral auction.”
A brief video on economic equilibrium, presented by Paul Solman.
Paul Solman presents this video on equilibrium prices.
In this video, we’ll review equilibrium in the adjustment process, showing that the equilibrium price is the only stable price. Then we’ll take a look at equilibrium quantity, where quantity demanded is equal to quantity supplied, and how this plays out in a free market economy that seeks to maximize gains from trade.
A classroom activity designed by the Federal Reserve Bank of Atlanta.
The concept of supply and demand is often considered the heart and soul of economics. It is the foundation for much of what is studied in the field, and understanding how supply and demand affect the economy can help us to recognize economics everywhere in our daily lives. (The British classical economist J.R. McCulloch is attributed with the famous saying that you can make a parrot an economist if you only teach it to say "supply and demand.") The supply and demand infographic highlights basic concepts such as the laws of supply and demand, changes in demand and supply versus changes in the quantity demanded and the quantity supplied, the determinants of demand and supply, and market equilibrium.
Does the equilibrium model work? Nobel Prize winner Vernon Smith conducted experiments testing this model.
Determine whether events cause a shift in the supply and demand curve using the interactive practice tool below.