Search Theory

Categories: Econ, Financial Theory

Every married couple has a story about how they met. Maybe their parents arranged the wedding. Maybe they started off as mismatched partners in a corrupt police department and learned to love and trust each other through a series of harrowing adventures. Maybe they used an online dating site.

Whatever the method, the marriage has a backstory. Same with any financial transaction. Buyers don't just magically appear when you have something to sell. Transversely, sellers don't just show up at your door the second you want to buy. In order for commerce to take place, buyers and sellers have to...find each other.

Search theory is the study of that effort. The field considers what's known as "transactional frictions": the things (big and small) that impede a market from operating perfectly. Like, when a buyer and seller initially don't like each other because they make superficial assumptions one another, but, over time, realize a mutual attraction and...wait, we're back in romantic comedy territory again.

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Econ: What are Determinants of Supply an...17 Views

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And finance Allah Shmoop what are determinants of supply and

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demand All right people we're going to follow the little

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shonka that could you know shonka is those super warm

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Russian hats with the ear flaps You have those things

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Well the journey of this little yushenko will show us

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all the ways demand curves and supply curve can shift

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and how those shifts can affect the market So there's

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this little Jew shonka that was made in a factory

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in Siberia waiting to find it's forever head to Don

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there that thing But the Russian currency the ruble took

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a tumble and the economy took a tumble with it

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When the ruble any economy took a tumble together Well

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so did people's incomes Because so many Russians had a

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change in income they were buying fewer hats Well this

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change in income made the demand for Yushchenko's go down

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which shifted the demand Kerr for Yushchenko's inward Well what

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happened when the demand Kerr for you shank has shifted

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inward Well you sh uncles are produced the supply Yeah

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that thing and sold the demand at the price and

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quantity where the two lines cross right there that little

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dot thing well when the demand curve get shifted inward

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it decreases both the price and the quantity for you

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shank a market equilibrium which is bad for you Shonka

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is trying Teo you know find there forever Heads if

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you think that's bad While things would get even more

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hopeless for the little you shonka Sorry we're just keeping

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it real here These other hats foreign hats called Beanies

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dropped in price in the Russian market when the economy

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went down And since the price of a substitute half

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rue Shankar's went down while the demand her for a

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shank has shifted even further inward Eventually the economy bounced

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back though And with it Russia was so overjoyed that

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they had a baby boom Well this change in number

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of buyers thanks to an increase in you know population

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shifted the demand Kerr for you Shank is up that

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way But not as much as our little lukashenka would

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have expected Why Well young Russians had gotten used to

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the Beanies Young Russians had a preference for Beanies over

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Yushchenko's and then another unfortunate even occurred climate change Yes

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Climate change made the Russian winters less miserably cold which

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made Yushchenko's well less useful This change in usefulness of

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Yushchenko's made the demand Kerr for Shankar's shift even further

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Inwards down down down the demand for you Shankar's went

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our poor little Lucia Anka Would it ever be sold

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Our story wouldn't be complete without looking at what happened

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to the supply curve Well guess what There used to

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be a tariff on Yushchenko's sold outside of Siberia on

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the one sold to the non Siberian parts of Russia

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The Kremlin saw the demand curve for the iconic wish

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Anca shift inward and decided to remove the shank A

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tear of right dead weight loss gone Thanks to this

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change in government policy the supply curve foryou Shankar's shifted

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outward again that way Better yet you shank a factory

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started making you Shankar Bo for rather than real fur

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to appeal to the preferences of vegetarians and vegans and

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Socialist which reduced overall production costs and for was in

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short supply anyway all because of that whole global warming

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thing and making it a whole lot more expensive and

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hard to find Well this change in production costs shifted

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this placard for Yushchenko's even further upward While that was

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good for all the little of Shankar's friends it wasn't

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necessarily good for it You know personally being a for

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you Shonka we'll still It gave the little lukashenka hope

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hope that was much needed after all those drops in

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the demand curve To try to compete with the Beanies

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you shank a factory invested in new technology which further

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shifted you shank a supply curve outward basically more hat

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making robots and fewer hat making people you know like

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what happened with car production in soon McDonald's one winter

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there was ah horrible winter storm in Russia Yes the

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most horrible of all The storm tore off many roofs

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including the shank a factory roof Our little Lou Shaka

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almost blew away But well this geographic influence caused you

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shonka supply curve to shift inward that way once the

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storm passed people who didn't have Yushchenko's while they regretted

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it you know regretted that they didn't have one resulting

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in an increase in demand for you shank as a

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symbol of Russian solidarity against the bitter cold At last

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our little lukashenka the last reel for Yushchenko was sold

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and found It's forever head The little Lou Shankar's forever

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had belonged to a young cheery Siberian boy even though

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that hat was too big a time The boy's father

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said that if he kept his ooh shonka in good

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condition he could use it until his head was big

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enough And for decades afterwards well too bad A Siberian

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monkey stole it off the boy's head just a minute

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later Yeah well happens anyway just to some five things

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that can cause a shift in demand Curves are changes

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in income price substitutes number of buyers like population growing

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or shrinking tastes and preferences for not for and usefulness

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like a zit cold out or not And for things

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that can shift the supply curve are changes in production

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costs New technology Yes Hello Robot geographic influences in taxes

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Stuff like that Like changes in government policy So remember

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when the supply and demand curves shift It changes the

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price and quantity where the two lines intersect changing the

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equilibrium and also remember Teo you know watch out for

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those Siberian monkeys Yeah they're part alien We think right

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