01 December 2016

A Song of Supply and Demand

I write themed final exam review for the Economics course I tutor, because I am a huge nerd. Now you can enjoy some Game of Thrones themed Economics problems while you wait for Season 7.

Congratulations! You have been appointed the Master of Coin, and now sit on the King’s small council – one of the most influential positions in all of Westeros. However, such a position of power is always a precarious one, so ensure you deal with the following problems carefully!

A Game of Loans
The Hand of the King wishes to host a tournament celebrating the King’s upcoming birthday, and has decreed a rise in income taxes from 10% to 20% in order to supply the prize money. You have some money put away in the Iron Bank of Braavos earning 10% interest, and inflation is consistently 1%. What will the effective tax rate be on your real interest, both before and after the Hand’s tax increase?

A Basket of Things
The visiting Warden of the West is concerned at the increasing cost of living in Casterly Rock, bringing along his Maester and a set of figures representing the consumption and price of various consumer goods from both this year and last year.

Last year, citizens bought:
  • 10000 loaves of bread at 1 copper stars each
  • 1000 barrels of wine at 100 copper stars each
  • 5000 pounds of meat at 10 copper stars per pound
This year, citizens bought:
  • 10000 loaves of bread at 2 copper stars each
  • 2000 barrels of wine at 110 copper stars each
  • 6000 pounds of meat at 15 copper stars per pound.

The King asks that you calculate the CPI in both years, and the inflation rate, and show your work & results to the Lannister Lord.

A Store of Swords
The King’s least favourite cousin wishes to start up his own sword shop in Oldtown, but has no idea how to run a business, as evidenced by the failure of his previous six shops. He claims he can obtain swords at 3 golden dragons each, and wants the King to grant him a local monopoly to ensure good business. The Master of Whisperers has managed to obtain the following information relating to demand for swords in Oldtown.
Quantity Demanded
Total Revenue
Marginal Revenue
Marginal Cost
Total Cost










The King orders that you complete the table and find the profit maximization point so his halfwit cousin isn’t driven out of business (again). What would the price likely be if the King decides not to grant a local monopoly?

The Wines of Winter
Winter is coming, and despite their political troubles, all of the Seven Kingdoms want to stock up on fine Arbor wines (in anticipation of decreased supply during the winter years). Draw a supply and demand diagram showing what happens.

The Grand Maester is alarmed at the rapidly changing price of wine, and suggests issuing a proclamation freezing the price of Arbor Red. Show on the diagram what is likely to occur, and explain to the Grand Maester what these consequences will be.

How might wine-makers and wine-buyers react to the resulting Shortage/Surplus? What other rationing methods might come into play?