Nice article, but this is a spectacularly oversimplified (and erroneous) view of how supply and demand operates, even in video games. Very few people in a game evaluate up front how much it's going to cost them to get certain things for sale and then base their price off that. They go after certain things based on whether they evaluate the current price as being worth it. Prices generally fluctuate within a certain range because most people sell by slightly undercutting the lowest price currently on the AH, until the price goes down far enough that they'd rather hang onto what they got rather than sell at that price.
DDO recently underwent a similar inflation due to some (perhaps) poor planning with the recent Anniversary event. The devs gave us an event where you could farm components to make some really nice items. That's okay as far as it goes, but due to the way they structured the event you wound up with an ENORMOUS surplus of some of the ingredients. And those ingredients could be used to buy items that you could sell for a good amount of cash.
I only farmed enough to fully upgrade 3 of the nice items, and I made over a million plat just liquidating my leftovers. Many, many people farmed far more than I did and got a correspondingly larger amount of money. (Keep in mind that this is a game in which it can take a year of solid work to pull down your first million plat--it gets easier once you have a stock built, just like in real life, but building up that stock when you still need to buy stuff regularly is really, really difficult.)
So, a lot of people have been posting high-ticket items on the AH for really inflated prices as a result. (The low-ticket stuff has not been affected one bit.) Here's the interesting thing though--for the most part, things aren't *selling* at the newly-inflated prices. There's been no rush, because most people who've been playing DDO for a while have a really solid underlying grasp of what an appropriate price is for those high-ticket items--and they exist in *theoretically unlimited quantities* just like everything else in the game. There's no limit to how many large dragon scales can come into existence, no ultimate scarcity.
So, instead of hyperinflation, the situation we have in DDO is actually *wealth creation*, albeit not the way it generally works in real life. (In real life, advances in production of goods/services have to precede increased money, because there IS real scarcity. In DDO we got a sudden influx of investment funds pulled literally out of the air, a feat governments are constantly attempting to accomplish and always failing at because, huh, REAL LIFE IS NOT A VIDEO GAME and tax money doesn't fall from the sky.)
In real life, wealth creation is a system that few people understand and is what leads to many economic misconceptions, like the idea that machines and less labor-intensive methods of production put people out of work, which is precisely the opposite of the truth--improvements in production are what ultimately allow for *more people* to be employed in easier jobs and get more out of the time they spend working, which they can then spend on luxuries they could not dream of prior to the process improvements.
Basically, you're doing what most armchair economists do, and ignoring the great and interesting complexity involved in these processes. It's great to explain things to "laymen", but don't dumb them down. Otherwise you wind up with people fearing wealth creation because they think it will lead to inflation, which was actually a big problem among academics and led to John Maynard Keynes's horribly incorrect fears about "overproduction" and the need for protection of markets and other nonsense.
