The economics of WOW and further proof of my geekiness

As if it wasn't readily apparent already, I present more evidence of my geekiness. One of my grad degrees is from the University of Chicago, a school that is known for economics. So I thought I'd put some of my economics concentration to good use and see what it can teach us about the WOW economy.

Now here's Econ 101... basic supply and demand. Demand always slopes down while supply always slopes up... now where the two curves meet is the equilibrium price and quantity.

Now here is my philosophy on selling Earthstorm diamonds, a major money maker for me. When there is a great supply of them (supply shifts from red to purple curve), price goes down so I save up all my diamonds for a better day. That better day would be when there is a low or no supply of them (supply shifts from red to pink curve). This means its price goes up and I am happy.

Now here is a theory as to what has been going on since patch 2.4 came out last week. With all these new dailies and the ability to do 25 a day now, I've seen prices for a lot of things on the AH go up. Now why could this be? Well perhaps since people have more money now, demand has increased (demand shifts from blue to green curve). Just having demand shift out means price goes up. But I have also noticed that there is a decrease in the number of sellers. Perhaps because they can make money with the easy dailies, they are not farming stuff to sell? Has supply shifted in (from red to yellow curve)? Basically it seems to me that there is less stuff on the AH and everything is more expensive.

I was mentioning this in the guild the other day seeing if others saw the same thing. I said I wondered if this was because of the patch changes. Our hunter Nio said that and because of rising gas prices. lol. He joked whether the Grand Poobah (whoever he is) needed to institute a price freeze in these difficult times. lol x 2.

Now a couple of months ago on Drenden, we had one player from the top raiding guild on the server try to use the principles of supply and demand to support his guild's raiding. He was buying all of the Primals and top end gems on the AH and relisting them at much higher prices. So he alone was controlling supply. While people bitched and moaned about it, and some said Blizzard should stop him, he was able to do it because demand didn't seem to change. People were buying at his high prices. Now doing something like this takes so much work, because he'd constantly have to buy out whoever listed those items he wanted to monopolize. So yes, he did get terribly rich, but eventually he couldn't keep up with all that work and stopped. Then his guild imploded and I think they all transfered servers.

But me, I am all for a free market. Otherwise I wouldn't have been able to buy the recipe for elixir of major mageblood for 5g the other day. This recipe is actually worth anywhere from 500-100g. This in economics is called information assymetry... basically one side, the buyer or seller has more information than the other. In this case, this seller was the uneducated one, aka the poor unfortunate one who doesn't use auctioneer. Free market enterprise FTW!.

So have you seen something similar on the AH on your server since patch 2.4? Any thoughts? I hope I didn't embarass my school with any econ mistakes...