Ghost Curve Ideology: The Supply Curve Generally Does Not Exist, So Why Is It a Core Concept in Almost Every Economics Textbook?


I frequently start a class discussion on the “Supply and Demand Model” (SDM) with a simple question to anyone in the class. If you were a pizza producer how many pizzas would you produce at a price of $15 a pie? Students give me a blank stare. I then elaborate. Consumers will have some idea of how many pizzas they will buy at any given price, assuming other “shift factors” like income, taste, and expectations do not markedly change, but producers can estimate how much they will produce at any given price only if they know something about demand conditions. Demand, however, is not a factor in constructing the supply curve (SC). Quite the contrary. The SC of introductory economics textbooks is supposed to be completely independent of demand. Demand is supposed to have no influence on the position or shape of the SC.

Though ubiquitous in economic texts, an independent SC does not exist for most of the economy. In most of the productioneconomy, firms set prices and levels of production...


Social Choice Equilibrium Price Consumer Surplus Cost Curve Supply Curve 
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© The Author(s) 2016

Authors and Affiliations

  1. 1.Benedictine UniversityIllinoisUSA

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