Is the law of supply and demand inconsistent with the law of adequate returns?

Answer 1

Well, let's see:

a) supply is contingent on resources available to grow, mine or otherwise produce a good or service. This requires capital investment, and the return on that capital should be derived from the return expected when selling such goods and services to those in DEMAND

b) demand is contingent on way more variables. Weather, economy, mood, need, marketing, peer pressure, it's all over the map.

c) adequate returns adjust to the economic environment at any given time. So if supply is expensive to produce and demand is sluggish, then 5% looks PHENOMENAL as a return expectation. 3% may be adequate. Conversely, if supply is cheap (compressed air!) and demand is high, adequate returns may start at 30%.

So no, the laws of supply and demand dictate reasonable profit expectations, and the rest is human will and intellect. Adequate returns are variable depending on the investor, but a norm can be established for every industry and that norm probably fluctuates most closely with the ups and downs of supply and demand.

Answer 2

doing your economics homework eh?