In Vernon Smith's Supply and Demand Lab Experiment

question 167

Multiple Choice

In Vernon Smith's supply and demand lab experiment:

• A) Smith knew the true demand and supply curves, but the subjects did not.
• B) the subjects did not know their own willingness to pay or sell.
• C) it took a long time to arrive at equilibrium.
• D) there were many unrealized gains from trade.

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Definitions:

Optimal Order Quantity

Optimal Order Quantity is the ideal amount of inventory a business should purchase to minimize costs while meeting demand without overstocking or understocking.

Economic Order Quantity

A formula used to determine the optimal order quantity that minimizes the total inventory holding costs and ordering costs.

Flow Time

The total time it takes for a product to move through a production process, from start to finish, including both processing and waiting times.

Weekly Demand

The total quantity of goods or services that consumers wish to purchase within a week, often used for inventory and production planning.