Is there an equation about the price?

[BlackHatCoiner]

Disclaimer: I'm studying economics, I haven't entered the university yet, so please reply gently if this is considered a dumb question.


I had this query of who defines the bitcoin price since I began reading about bitcoin and I found out it's demand & supply, which is considered a simple ecomonic rule for those that study economics. I never got an answer, though, of how exactly is that number calculated. Is there an equation that combines demand and supply?

As far as I know the price of a commodity can be understood if we see this curve:

We observe that as long as demand and quantity increase, the price does so. I checked wikipedia and it showed me:

Q(P) = 3*P - 6

Q(P) = 5P^0.5

Now, I'm not sure that I understand these. How can the first example be a curve since a*x - b is always a straight line?

I would also like to ask if these exchanges use this equation to calculate the price and if they intend to increase it intentionally to earn more.

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[Tytanowy Janusz]

Its not being calculated. Bitcoin price is based on last price it was traded. Every CEX has order book where people put their orders. When you put a buy order and your price (that you put making your order) is higher than the lowest sell price you have a trade (same with sell order). Price of this trade is price of bitcoin.
When your buy price is lower than the lowest sell price, your orders stays in order book and wait for it to be filled when/if price all orders above will be filled.

Left- orderbook. Right - last trades

[jackg]

This would be possible iff (if and only if) demand and supply remained stable.

Supply in price terms is the amount supplied to an exchange. It may have a correlation with the coin's inflation rate but won't be determined directly of that as people will be willing to supply more if the price is higher.

(the order book in the first response to this post sums up how supply and demand can be determined) people bid on what they'd buy the coin for and others set asks. If you buy or sell to market (don't want to way and don't set a bid or an ask) the highest bid will be picked for a sell and the lowest ask will be picked for a buy.