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Updated April 6, 2009 12:01 a.m. ET Bubbles have been frequent in economic history, and they occur in the laboratories of experimental economics under conditions which -- when first studied in the 1980s -- were considered so transparent that bubbles would not be observed. We economists were wrong: Even when traders in an asset market know the value of the asset, bubbles form dependably. Bubbles can arise when some agents buy not on fundamental value, but on price trend or momentum. From Bubble to Depression? From Bubble to Depression?
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Supply and Demand Theory Supply and Demand Theory Australia is a market based economy . Goods and services are bought and sold freely, and most production is based on decisions made by private sector firms. In a market, the two key forces are those of supply and demand . In a market, the two fundamental variables are price and quantity . We can prepare a table of individual demand by asking consumers what quantities of a good they would buy, at different prices. In the market summarised above, we can see that 17 items would be bought per week, if the price charged by suppliers is $1 per item.
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