<p>Industrial Organization is the field concerned with estimating supply and demand relationships in individual product markets. You can see for example <a href="https://www.stanford.edu/~jdlevin/Papers/IO.pdf" rel="nofollow noreferrer">Einav and Levin</a> for a description of what empirical IO people are up to. The specific models are usually much more complicated than what you learn in Mankiw, tailored to specific markets, and very strong assumptions are required to estimate them. For recent IO papers, you can see for example <a href="http://www.nber.org/papersbyprog/IO.html" rel="nofollow noreferrer">the NBER working paper series</a>.</p>

CC BY-SA 3.0
2017-08-04T19:18:43.663Z
Thanks for your answer. Unfortunately, I didn't find anything like supply or demand curve among the NBER working paper. Do you have some of them in mind?
zer0hedge
CC BY-SA 3.0
2017-08-03T14:55:31.793Z
2017-08-03T14:55:31.793Z
Tobias
<p>I've just started to read an excellent textbook <a href="http://rads.stackoverflow.com/amzn/click/B00BSZUGIW" rel="nofollow noreferrer">"Macroeconomics"</a> by Gregory Mankiw. In the beginning he explains how economists think:</p>

<blockquote>
  <p>Young children learn much about the world around them by playing with toy
  versions of real objects. For instance, they often put together models of cars, trains, or planes. These models are far from realistic, but the model-builder learns a lot from them nonetheless. The model illustrates the essence of the real object it is designed to resemble. (In addition, for many children, building models is fun.)</p>
  
  <p>Economists also use models to understand the world, but an economist’s
  model is more likely to be made of symbols and equations than plastic and glue.</p>
</blockquote>

<p>Then he explains what endogenous and exogenous variables are and </p>

<blockquote>
  <p>To make these ideas more concrete, let’s review the most celebrated of all
  economic models—the model of supply and demand</p>
</blockquote>

<p><a href="https://i.sstatic.net/RYoRq.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/RYoRq.png" alt="enter image description here"></a></p>

<p>The above is obviously a toy model of Supply and Demand. But since nobody will start building a new car having only a toy model of it, I suppose that there must be some empirical research showing how Supply and Demand curves behave in real life and how equilibrium is reached which are used by economists for decision-making etc.   </p>

<p>Is there any article or probably textbook which contain an example of <strong>working model</strong> (i.e. an opposite of the toy model) of Supply and Demand?  I'd like to grasp the difference between toy and working model of Supply and Demand. </p>

CC BY-SA 3.0
2017-08-03T09:25:08.540Z
As an unrelated comment, [this](https://www.exploring-economics.org/en/orientation/#compare) might interest you. Economists think in many different ways.
luchonacho
CC BY-SA 3.0
2017-08-03T09:35:23.507Z
@luchonacho Thanks  - a very interesting site!
zer0hedge
CC BY-SA 3.0
2017-08-03T11:47:10.860Z
What you exactly want may depend on your context. Different models exist for looking at the market for potatos or the macroeconomy. Furthermore, a more complicated model is only necessary for insights that this model cannot produce. As this model can already answer several questions, the more comlplicatd type of model you're asking for depends on the questions about the economy you want to answer.
BB King
CC BY-SA 3.0
2017-08-03T14:13:42.577Z
@BBKing I just want to see any real model, i.e. where supply and demand are not just arbitrary lines but are estimated based on empirical data
zer0hedge
CC BY-SA 3.0
2017-08-03T14:45:41.857Z
The problem with that is that a model is theoretical, while estimation is empirical. An estimated demand curve would not be a "model". Also, are you interested in just the slopes of the curves or the shape as well? Theoretically it is impossible for suppy to slope downward, so estimation is not really needed there, unless you're interested in what shape exactly it has for some industry. Even then, however, it would differ by industry and not help us much for a model. Demand is a bit trickier. Are you interested in empirical estimations of demand and supply curves (which would not be models)?
BB King
CC BY-SA 3.0
2017-08-03T15:22:16.540Z
@BBKing your comment is quite misleading. First, every estimation relies on a model, and your distinction between "estimation" and "models" is completely arbitrary. Second, it is often highly important to have an idea of the slopes parameters beyond the sign, for example when you set tax rates.
Tobias
CC BY-SA 3.0
2017-08-03T16:26:44.263Z
@BBKing Model of car is a model of "real" car. I suppose that the model of supply and deman is the model of "real" supply and demand, right? So by "working model"  I mean the model which is closer to reality
zer0hedge
<reference-request><supply-and-demand>
A working model of Supply and Demand
zer0hedge
# A working model of Supply and Demand

(Asked by: username_0 on 2017-08-03)

I've just started to read an excellent textbook ["Macroeconomics"](http://rads.stackoverflow.com/amzn/click/B00BSZUGIW) by Gregory Mankiw. In the beginning he explains how economists think:

> Young children learn much about the world around them by playing with toy
> versions of real objects. For instance, they often put together models of cars, trains, or planes. These models are far from realistic, but the model-builder learns a lot from them nonetheless. The model illustrates the essence of the real object it is designed to resemble. (In addition, for many children, building models is fun.)
>
> Economists also use models to understand the world, but an economist’s
> model is more likely to be made of symbols and equations than plastic and glue.

Then he explains what endogenous and exogenous variables are and

> To make these ideas more concrete, let’s review the most celebrated of all
> economic models—the model of supply and demand

[![enter image description here](https://i.sstatic.net/RYoRq.png)](https://i.sstatic.net/RYoRq.png)

The above is obviously a toy model of Supply and Demand. But since nobody will start building a new car having only a toy model of it, I suppose that there must be some empirical research showing how Supply and Demand curves behave in real life and how equilibrium is reached which are used by economists for decision-making etc.

Is there any article or probably textbook which contain an example of **working model** (i.e. an opposite of the toy model) of Supply and Demand? I'd like to grasp the difference between toy and working model of Supply and Demand.

**Tags:** reference-request, supply-and-demand

> **Comments:**
> **username_1**: As an unrelated comment, [this](https://www.exploring-economics.org/en/orientation/#compare) might interest you. Economists think in many different ways.  
> **username_0**: @username_1 Thanks  - a very interesting site!  
> **username_2**: What you exactly want may depend on your context. Different models exist for looking at the market for potatos or the macroeconomy. Furthermore, a more complicated model is only necessary for insights that this model cannot produce. As this model can already answer several questions, the more comlplicatd type of model you're asking for depends on the questions about the economy you want to answer.  
> **username_0**: @BBKing I just want to see any real model, i.e. where supply and demand are not just arbitrary lines but are estimated based on empirical data  
> **username_2**: The problem with that is that a model is theoretical, while estimation is empirical. An estimated demand curve would not be a "model". Also, are you interested in just the slopes of the curves or the shape as well? Theoretically it is impossible for suppy to slope downward, so estimation is not really needed there, unless you're interested in what shape exactly it has for some industry. Even then, however, it would differ by industry and not help us much for a model. Demand is a bit trickier. Are you interested in empirical estimations of demand and supply curves (which would not be models)?  
> **username_3**: @BBKing your comment is quite misleading. First, every estimation relies on a model, and your distinction between "estimation" and "models" is completely arbitrary. Second, it is often highly important to have an idea of the slopes parameters beyond the sign, for example when you set tax rates.  
> **username_0**: @BBKing Model of car is a model of "real" car. I suppose that the model of supply and deman is the model of "real" supply and demand, right? So by "working model"  I mean the model which is closer to reality  

---

## 1 answers

### Answer by username_3 on 2017-08-03. Score: 1

Industrial Organization is the field concerned with estimating supply and demand relationships in individual product markets. You can see for example [Einav and Levin](https://www.stanford.edu/~jdlevin/Papers/IO.pdf) for a description of what empirical IO people are up to. The specific models are usually much more complicated than what you learn in Mankiw, tailored to specific markets, and very strong assumptions are required to estimate them. For recent IO papers, you can see for example [the NBER working paper series](http://www.nber.org/papersbyprog/IO.html).

> **Comments:**
> **username_0**: Thanks for your answer. Unfortunately, I didn't find anything like supply or demand curve among the NBER working paper. Do you have some of them in mind?  

---

