How the Economy Works

[Teckos_Pech]

@Nep-Neps

If there’s only 10 cookies and 10 people in the society, then everyone gets their cookie and everyone’s happy.

No.

The number of cookies people have depends on the preferences of the 10 people regarding cookies and other goods in the economy. Also, the cost is important too, but you’ve already ruled out changes in cost ex ante by assuming a perfectly elastic supply function. Hint: supply is the horizontal sum of the various marginal cost curves.

So, it is possible that not everyone has a cookie…because those people value cookies such that they want no cookie and instead want other goods and services. This assumption that everyone has a cookie is very restrictive.

Now, if you want to start out in an economy where everyone starts out with an endowment of one cookie and then engage in trade that’s fine. But that is not what you are doing. Oh, and if you are going to do this…have at least two goods so there is the notion of a trade off. To get another cookie what must I give up in return…

@Nep-Neps

Finally, let’s assume cookies are a necessity to live. This both drives demand up and at some point the cookie sellers will think “Hey, if I increase the prices of my cookie people will still have to buy it because they need it”. They can increase the price to whatever they want, as long as people can afford it, which further drives prices up.

Again…no. If we argue that cookies are a necessity that is say everyone needs at least one cookie that has implications for the slope of the demand curve, at least in a particular region, it does not “drive up demand”.

@Nep-Neps

Now given these three examples, prices of limited commodities work just like cookies. Let’s take PLEX for example.

Now your framework of a cookie vs. PLEX doesn’t work. It doesn’t work because there is a very good substitute for PLEX that is actually quite a bit cheaper: a subscription. Now a player who has accumulated a massive amount of wealth, say a trillion ISK or more might decide to PLEX his account, but players who are trying to PLEX their account without such vast wealth are failing to appreciate the opportunity cost of time.

@Nep-Neps

Now given these three examples, prices of limited commodities work just like cookies. Let’s take PLEX for example. Lots of isk is being injected into the economy through b̶o̶t̶s̶ krabs, the playerbase expanded greatly with the introduction of alphas and now many people require plex to keep their L4 missions and rorq/supers running. This increases the CPI of eve’s economy, and as a result we pay more for PLEX.

Wow…

No. Just no.

First off krabbing does not have to inject ISK. Krabbing via mining or say invention can allow one to acquire ISK but not result in de novo ISK creation. Killing rats is the primary source of de novo ISK creation.

Second, when the price of one good goes up that is not necessarily due to inflation. Inflation is an increase in the general price level, not just one good.

Third, I’ve actually downloaded the PLEX data from a few days ago and the number of PLEX on the market has been going down. That, in and of itself, could cause the price to go up. If there are fewer PLEX being put up for sale on the market, then competition on the demand side would drive up the price.

@Nep-Neps

Of course, all of these are based on the assumption that the supply of PLEX isn’t decreasing, and by supply I mean the amount of PLEX bought daily.

What do you mean “bought daily”? Goods and services bought in a market are a function of both supply and demand.

@Nep-Neps

Go take your own macro/micro course.

I would suggest that perhaps you revisit your micro-economics course. You’ve clearly made a number of mistakes above. In particular, I’d suggest you look at the chapter on general equilibrium.