Note that “supply and demand” for economists means that the demand curve is derived from consumer optimization (price = marginal utility), that the supply curve is derived from firms’ profit maximization (price = marginal cost), both assuming price-taking behavior, that it implicitly assumes that trade actually takes place where the curves intersect (my impression is that a large literature on adjustment processes has basically disappeared because the assumption that we only care about equilibria in this sense became the norm).
People who hear that this is simple may confuse it with the claims that consumers demand less when the price is lower and that firms offer less when the price is higher (and that trade actually takes place where the curves intersect), which are claims that can be backed by different underlying models. You can derive a demand curve either by assuming that everybody buys more when the price increases (the standard reasoning), or that everybody buys exactly one unit if the price is below her individual willingness to pay.
It seems that a model which assumes that firms are price-takers in this sense and supply at marginal cost is not simpler than a model which assumes that firms always have a mark-up of 20% on their marginal cost. Sure, the mark-up demands an explanation, but this way you don’t need the profit-maximization arguments (which makes the model simpler).
Finally, often we are not sure whether a simpler or a certain more complex model actually applies well to any given situation. So we have to worry that people argue in favor of simpler models mainly to justify their preferred policies—because the policy-implications of certain simpler models are well-known.
Note that “supply and demand” for economists means that the demand curve is derived from consumer optimization (price = marginal utility), that the supply curve is derived from firms’ profit maximization (price = marginal cost), both assuming price-taking behavior, that it implicitly assumes that trade actually takes place where the curves intersect (my impression is that a large literature on adjustment processes has basically disappeared because the assumption that we only care about equilibria in this sense became the norm).
People who hear that this is simple may confuse it with the claims that consumers demand less when the price is lower and that firms offer less when the price is higher (and that trade actually takes place where the curves intersect), which are claims that can be backed by different underlying models. You can derive a demand curve either by assuming that everybody buys more when the price increases (the standard reasoning), or that everybody buys exactly one unit if the price is below her individual willingness to pay.
It seems that a model which assumes that firms are price-takers in this sense and supply at marginal cost is not simpler than a model which assumes that firms always have a mark-up of 20% on their marginal cost. Sure, the mark-up demands an explanation, but this way you don’t need the profit-maximization arguments (which makes the model simpler).
Finally, often we are not sure whether a simpler or a certain more complex model actually applies well to any given situation. So we have to worry that people argue in favor of simpler models mainly to justify their preferred policies—because the policy-implications of certain simpler models are well-known.