#### sweetbasil

##### Well-known member

Law Of Supply And Demand

What Does Law Of Supply And Demand Mean?

Quote:

A theory explaining the interaction between the supply of a resource and the demand for that resource. The law of supply and demand defines the effect that the availability of a particular product and the desire (or demand) for that product has on price. Generally, if there is a low supply and a high demand, the price will be high. In contrast, the greater the supply and the lower the demand, the lower the price will be.

Source: http://www.investopedia.com/terms/l/law-of-supply-demand.asp#axzz1e58vfRYs

Now if you understand ( C + P = SP ) and the Law Of Supply And Demand which controls SP. you are well on your way to being a critical thinker.

With this knowledge you can predict the future and become rich, even in the cattle business.

SL"

Sir. Loin,

Let me warn you, I am not a "critical thinker" (just an average thinker).

I believe the above equation defines price determination of a product. One can not only use the given components above to calculate the selling price, the profit, but also the mark-up, and gross margin in order to maximize profit.

Please feel free to correct me and teach me if I am wrong. I noticed that you mentioned that LP is

"A word of caution:

When Linear Programming, or any other theory, comes in conflict with Capitalism, capitalism will always win and linear programming etc will always lose.

History has proven that.

If you doubt it, how do you explain Americans accomplishing in about 200 years what the rest of the world was incapable of accomplishing in over 2,000 years?

Here are some of America’s best examples of failed non capitalistic programs"

Linear programming is not a "theory" maybe you have a different definition of linear programming than I do... Linear programming is a "linear optimization" method that can be use to achieve the best possible outcome..

For example:

Suppose that company X stocks bulk amounts of four types of feeds that it can mix to meet specific customer's orders. Suppose there are four feeds, their composition of corn, grain, and minerals, and the cost per pound of each nutrient is given:

Nutrient Feed 1 Feed 2 Feed 3 Feed 4

X 30% 5% 20% 10%

Y 10% 30% 15% 10%

Z 20% 20% 20% 30%

Cost per lb $0.20 $0.35 $0.40 $0.15

Now suppose that company X just received an order from its largest customer (Ms. Bucket) for 5000 pounds of feed. If Ms. Bucket wants this feed to contain at least 20% of nutrient X, 15% of nutrient Y, and 15% of nutrient Z. The company now wants to know how it should fulfill this order at the lowest costs.

The goal is to define all of the components of this LP problem to create a model in excel to find out exact mix of nutrients that will result in the lowest cost.

The above is just a basic example that can be done by hand and using a simple program like excel; I am aware now that there are many programs available in the market that are used in agriculture that are capable of solving these types of problems etc. My limited understanding of LP can only help me question a result and have an understanding of what an optimization program is doing when I entered a given set of constraints while trying to solve such problems.

How is a mathematical model like LP interfering with capitalism? If mathematical models like LP can help a firm lower cost and/or maximize the allocation of its resources which can lead to an increase in efficiency and profits, how could this "... come into conflict with capitalism"?

I personally think that the "...failed non capitalistic programs" you mentioned are due to the lack of implementation of tools like LP models or Six Sigma methodologies that could help government find excessive waste in the current system; instead, our government keeps spending more and creating a bigger system without fully maximizing the allocation of the resources currently in the system.

Lastly, if one can become rich by understanding the fundamental laws of supply and demand, why don't we have more rich ranchers/farmers (my former economic teacher is far from being rich, and he lives by these laws)? Could you elaborate on how you arrived to this conclusion?

SB