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Part 2 of Supply and Demand in the Gaian Economy
What Is The Law of Supply?


The Gaian marketplace is primarily driven by the monthly donation items, which will be referred to as MC's for the rest of this article. These items are the main resource that the economy of Gaia is built off of. Many exchangers got their start buying and selling the Sealed Envelopes, or the TYL's. (Thank You Letters.) These are only available for one month, and thus the items that the letters contain are also only available (in an unlimited quantity) for a month. This creates the scarcity that drives the MP.

The Law of Supply is the compliment of the Law of Demand. It states that there is a direct relationship between the price of a good and the quantity sellers are willing to offer for sale. Thus, the higher the price of an item is, more sellers will sell more of it. That also means that the cheaper an item is, fewer sellers will be selling less of them. A change in the quantity supplied is when more items are offered, for a GREATER price, whereas a change in supply in an increase of the number of items available at the same price. (I’ll go into the distinctions a little more, along with more on demand, in the next part.) Nonprice determinants play a role in with both changes in supply and changes in quantity supplied. The nonprice determinants of supply that apply to the Gaian Economy are: Number of Sellers, Taxes, and the Expectations of the Sellers.

The first of the nonprice determinants that play a major role in Gaia is the Number of Sellers. This has an impact in two major ways. The first is that the more sellers, the lower the prices go, as the sellers try to compete to get THEIR item sold. It also decreases the price, as the supply increases with more sellers. If the number of sellers decreases, the price increases. The second was Taxes. On Gaia, the closest thing we have to a tax is the 2% listing fee. That is enough to make some sellers hold back from using the MP, as they don’t want to lose any of their precious profit. The final one that plays a major role is the Expectations of the Sellers. If a seller expects an item to do well in the future, they will decrease the number they are selling. If all sellers do that, then this has the unintended effect of raising the price of the item. The converse is also true; that is, if sellers expect an item to do poorly in the future, they’ll rush to sell it now. The increase in supply causes prices to drop even more then they may have without the rush.

In the next part, I’ll be explaining the connection between supply and demand.