Quote:
Originally Posted by FinancialWar
That supply curve is not odd, that is a normal supply curve. You're confusing supply curve (supply and demand analysis) with economies of scale.
A supply and demand analysis is a partial equilibrium analysis, that is ceteris paribus (as I have stated) meaning all other things held constant. It does not take into account the product average cost which is what you're suggesting.
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The best will be not to buy at all. The price drops close to zerro. The company will go bancrupt, but it does not mind.....
I am not economist, but I guess that that graph is valid only for strictly rigid (non-flexible supply). But it is assumption that is not valid. The supply side is flexible and so the higher demand the lower price.
Your model works for Logitech Squeezebox devices. The production has been stopped and the demand is relatively high. The price of seconhand devices is higher than used to be for new devices. But your model would not work for device in production. Maybe few weeks/months but not longer.