View source for Economy guide

{{Obsolete|Many sections are no longer consistent with the market; text graph should be replaced with image.}}
The '''economy''' in [[RuneScape|''RuneScape'']] bears many similarities to economies in the real world. In ''RuneScape'', [[items]] can be produced, exchanged and used by players. Players can exchange these items through [[trading]] or via the [[Grand Exchange]] (the market). Grand Exchange prices vary due to many factors, the most basic one being [[wikipedia:supply and demand|supply and demand]]. This can have a big influence on the behaviour of players.

Real world economies behave differently from ''RuneScape's'' in some respects, particularly because of the limited time many have to play the game, which renders the availability of financial organisations such as player owned banks, shops, stocks, or insurance companies difficult. A difference between the two economies is that median prices on the Grand Exchange only update, on average, once every 24 hours, usually resulting in a change in the price of an item of no more than 5% either way, whereas in unrestricted economies market prices may change in real time and there is no limit to how much the price can rise or fall in a given time.

The ''RuneScape'' economy also lacks some key economic principles which arguably exist in the real world, including a lack of [[wikipedia:Risk-free_interest_rate|risk free investments]] and an absence of government enforcement for financial contracts. It also violates, among other concepts, the [[wikipedia:Efficient-market_hypothesis|efficient market hypothesis]]. This means that capable merchants are able to predict the direction of prices accurately and make high profits, which is often untrue in the real world. These differences make the ''RuneScape'' economy simpler but much less diverse than the real world economy.

There are several [[currencies]] in ''RuneScape''; most currencies, however, are used in trading between [[non-player character]]s and players in certain areas. Therefore, [[coins]] will be treated as the exclusive currency for player-to-player trading in this guide.

In general, there are several categories of items that players may obtain. [[:Category:Quest items|Quest items]] and other untradeable items are not covered here, as they have little to no impact on the player economy. Four main item categories - primary products, consumables, finished items, and discontinued items - will be discussed in detail in this guide.

''This guide is for informational purposes only, and may not reflect recent changes in the economy.''

===Introductory Concepts: Supply and Demand===
Supply and demand are the market forces that determine the price of an item, unless it is affected by price control mechanisms. Supply is, essentially, the availability of an item on the market while demand is how much a player wants (and can pay for) an item. A supply and demand graph can be created to view a general price of an item. The curves on the below graphs show the quantity of a good supplied or demanded at a given market price (if there is more profit to be made, more will be supplied, whereas if a good becomes cheaper, more will be demanded). If there is no intervention on the market, it will naturally "balance out" at the equilibrium point.


 Supply                              Demand
                 |         S      |                  |                |
               5 |        /       |                5 |     \          |
    Price      4 |       /        |     Price      4 |      \         |
  ($/Shrimp)   3 |      /         |   ($/Shrimp)   3 |       \        |
               2 |     /          |                2 |        \       |
               1 |    /           |                1 |         \      |
                 |________________|                  |__________D_____|
                      2 4 6 8                           2 4 6 8
                  Quantity (1000s of Shrimp/Day) *Same for both graphs
 
 
               The Equilibrium Point (where price = quantity)
                 |         S      |
               5 |    \   /       |
    Price      4 |     \ /        |
  ($/Shrimp)   3 |- - - X         |
               2 |     /|\        |
               1 |    / | \       |
                 |______|_D_______|
                      2 4 6 8      
           Quantity (1000s of Shrimp/Day)
 
                 Increase in Supply                  Increase in Demand
               (Double Fishing XP week)          (Shrimp heal more per bite)
                 |         S0  S1 |                  |                |
               5 |        /   /   |                5 |     \   \      |
    Price      4 |       /   /    |     Price      4 |      \   \     |
  ($/Shrimp)   3 |      /-->/     |   ($/Shrimp)   3 |       \-->\    |
               2 |     /   /      |                2 |        \   \   |
               1 |    /   /       |                1 |         \   \  |
                 |________________|                  |__________D0__D1|
                      2 4 6 8                           2 4 6 8
                  Quantity (1000s of Shrimp/Day) *Same for both graphs
 
 
                 Increase in Supply                  Increase in Demand
               (Double Fishing XP week)          (Shrimp heal more per bite)
                 |         S0  S1 |                  |           S   |
               5 |    \   /   /   |              ^ 5 |- - -\- -X     |
    Price      4 |     \ /   /    |     Price    | 4 |      \ /|\    |
  ($/Shrimp) | 3 |- - - X-->/     |   ($/Shrimp) | 3 |       X-->\   |
             | 2 |     /|\ /      |                2 |      / \|  \  |
             V 1 |- - /-+-X       |                1 |     /   \   \ |
                 |______|_|_D_____|                  |_________|D0__D1
                      2 4 6 8                           2 4 6 8
                  Quantity (1000s of Shrimp/Day) *Same for both graphs
 
 A decrease in demand has the same effect on price as an increase in supply (price falls), except the demand curve will move left.  An example of a decrease in demand would be shrimp making stats decrease, reducing the willingness of players to buy shrimp.
 A decrease in supply has the same effect on price as an increase in demand (price increases), except the supply curve will move left.  An example of a decrease in supply would be anchovies being updated so that they give even more xp than shrimp.  More fishers are catching anchovies instead of shrimp now, so there are fewer shrimp available on the market.
 
 
                 Discontinued Items
                 |      S         |
               5 |    \ |         |     
    Price      4 |     \|         |     
 (100M$/PHat)  3 |- - - X         |
               2 |      |\        |
               1 |      | \       |
                 |______|__D______|
                      2 4 6 8      
           Quantity (100s of PHat/Day)
 
 
 In this case, since there are no partyhats entering, the demand of the item is the factor which drives the price (although supply will steadily decrease due to partyhats lost through characters quitting, deaths, etc., also gradually increasing price over time). As no new partyhats can enter the market, the supply is perfectly unresponsive to price changes and the quantity of partyhats on the market cannot increase.  Thus, the movement of the supply curve can largely be ignored.

==Merchants==
{{main|Advanced Trading guide}}
Merchants buy items from players to attempt to make a profit by selling the items to other players at a higher price. Buying items from shops and selling them to players for a higher price that was paid is also sometimes considered merchanting.

There used to be a type of merchant who would buy items in small quantities from many players for low prices, and sell in bulk for higher prices. As of 1 February 2011 merchants have came back in a big way, now that there is no trade limit.

There are three types of merchants who use the Grand Exchange: flippers, investors, and manipulators. Individuals may engage in more than one of these types, however. See the [[Advanced Trading guide|Merchanting]] article for more information.

In terms of effects on the economy, flippers do not have much effect. They buy items when there is high supply on the Grand Exchange and then sell them when there is high demand, within the same day or Grand Exchange update period. Investors have a larger effect, holding onto an item for several days with the expectation that it will rise in price, and manipulators have the largest effect on the market. Manipulators will try to manipulate the prices for their own gains (by seeding panic, or by creating an artificial demand).

===Store Arbitrage===
In the past, players could buy items from stores at stock prices and sell them to other players for a higher price, often intentionally creating a shortage of slow-restocking items. However, after recent changes made by Jagex, this no longer has any effect as shop stock is now personalized.

Players may also buy up overstocked, price-depressed items cheaply, and then sell them at another store, on another world, or at a later time where the items are no longer in stock. However, the level of overstocking needs to be quite severe to ensure that the selling price bottoms out at a level sufficiently below the normal buying price of the store that such activity is profitable.

Players may also conduct store arbitrage by modifying some items; for example, by stringing amulets, so that they become classified as an altogether different item, and immediately sell a few back to the same store.

==Stability of the Runescape Economy in terms of inflation/deflation==
The ''RuneScape'' economy has had both periods of inflation and periods of deflation. In the past, the economy was in a state of deflation for at least a year and a half before June 2009. Between that time and 2011 the market was inflating. Starting in January 2011, the market moved into a state of deflation. When [[Wilderness]] and [[Free Trade]] were released on 1 February 2011, the market delflated even more. High Alching and the aforementioned conversion of PvP drops into coins became the two major sources of coins being added to the economy. Mass inflation has ensued due to the large amount of coins that PvPers have added into the economy, thus decreasing the respective value of coins compared to the value of the items that they are used to buy.

[[Wikipedia:Gold sinks|Gold sinks]] are features that remove coins or items from the in-game economy. The primary gold sinks are buying items (including skill-related items, such as magic stones or [[spirit shards]] from shops), losses on banned accounts, coins or items lost when they are dropped and not picked up, constructing a Player Owned House, the cost of repairs to [[Barrows equipment|Barrows armour]] and the recharging of [[Crystal bow]]s and Chaotic equipment and the use of the sawmill to create planks. While the use of consumables such as [[food]], [[herblore#Potions|potions]], [[arrows]] and [[runes]] also drains value from the game, this value is added (in most cases) when players produce consumables, primary products and finished items through monster drops or through the use of skills. The consumption of consumables and loss of other items through player death helps balance the ''RuneScape'' economy; however, the level of balance thus produced is a contentious issue as, for example, the use of consumables can be seen as an investment if the loot gained from monsters killed while a player was using consumables surpassed the value of said consumables.

The [[Construction]] and [[Summoning]] skills are the largest gold sinks as they require players to spend a hefty amount of coins (many of which are directly removed from the game through sawmill fees, building dungeon monsters, or buying spirit shards and pouches, respectively).

The economy is split-level, where the price shifts of high level items have little effect on the prices of basic items. Nonetheless, it is common for the prices of items to be linked together (they are in ''joint demand'', meaning that a change in the price of one item will lead to a change, in the same direction, in the price of the other item), as they serve similar purposes. For example, if there were a massive decline in the price of godswords, then other high level weaponry and possibly also other equipment, such as the abyssal whips, dragon boots, Bandos items, and berserker rings might also decrease in value (however, the reverse may occur if the items in question serve similar purposes at a similar level- it is then highly likely that they will be in ''competitive demand''). Items that are completely unrelated (coal and black dragonhide, for example) will likely not be affected by changes in the price of the other item. As in real-life economies, however, "irrational" player psychology may also influence the demand for, and thus the price of, items.

Inflation is somewhat difficult to gauge and control in Runescape. Because of frequent updates that benefit only high level players, or a small percentage of certain players, a select amount of players can make massive amounts of money (and create new money through drops). This increases the overall money supply, thus leading to inflation. However, since most of the money is in the hands of only a small clique of players, inflated prices hurt the majority of Runescape citizens that are unable to make money as fast as the players that benefit from new game additions and updates.

===Price controls===
Certain items are commonly bought from stores or sold to stores. For these items, the store price serves as a stabilising factor; the price is not entirely based on player supply and demand; rather, the stores introduce a price floor (minimum price) or ceiling (maximum price) to the markets for those items. For items commonly bought from stores, the Grand Exchange price cannot rise much beyond what it costs to buy it from the store (ignoring the possible factor of convenience, if the store is far from hubs of player activity, as is the case with halberds), as buying from the store is often the cheapest alternative for players in such a situation. These price controls are also present as limits in the prices that players may exchange their items for on the [[Grand Exchange]]. An example of such an item is a [[Marble block]], which can only be obtained from the Stonemason in Keldagrim for 325,000 coins each. For items commonly sold to stores, the Grand Exchange price cannot fall much beyond the store price (again, due to greater profits being obtained by selling the item to a store, rather than on the free market). An example of such an item is [[Willow logs]], which may be sold to a general store for 8 coins each. This encourages inefficiency as the distorted Grand Exchange prices foster shortages (where there is limited supply relative to demand, and buyers must often wait for long periods of time before the purchase is completed- e.g. a Left Eyepatch) or surpluses, where shop prices are low relative to exchange prices and sellers must often wait long periods of time to sell their products due to low demand at free market prices.

Store purchasing prices shift by a certain amount depending on stock levels, and where large amounts of player-made items are sold to the store, postive margins can be eroded or become negative.
"Hard prices" are the prices of items commonly acquired through shops that do not usually change unless the store prices are directly changed by Jagex. One case of "hard price" inflation in ''RuneScape'', was when [[Jagex]] raised the store price of [[Chaos rune|Chaos]] and [[Death rune]]s to be close to the typical player trading price, as the low prices aided autobuying [[Macro|bots]] who camped in the stores and bought all the stock as it respawned. A case of "hard price" deflation was when the Karamja gloves came out and an onyx gem could be obtained for 260,000 Tokkul instead of 300,000.

===Soft prices===
"Soft prices" are the prices of items that are largely controlled by player supply and demand. This is often the case when the item cannot routinely be obtained from a store, as players must rely on finding a player trading the item that they want at a price that they are prepared to pay.

===Effects of inflation and deflation===
An uptick or downtick in prices is both beneficial and negative for the RuneScape economy. Merchants will lose money, often millions, in the event of a crash, as their stock is devalued, while they will profit from a boom. Conversely RS merchants often have a big cash pile which will have more purchasing power after a crash, and less after a boom. Skillers, adventurers, and other players who need consumables, armour, etc. benefit from crashes, allowing for more affordable goods. For example, in the 2011 free trade crash, swordfish went from close to 500 gp to below 200 gp, meaning that adventurers needing food could buy it at better prices, conversely skillers wanting to train fishing could no longer make the same amount of money. During periods of inflation, items become harder to purchase due to their expense compared with cash piles made under a less inflated economy.

==Types of item==
It is logical to divide items into a few distinct classes.

===Primary products===
Primary goods, also referred to as raw materials, have uses in processing/manufacturing skills such as [[Cooking]] and [[Fletching]]. They cannot be used or consumed in any other way. Most of the time, primary products are used to produce consumables, finished products, or other primary products. In bulk, primary products are often quite easy to sell as they are demanded by players looking to gain levels in processing skills. This is, however, not the case for items that are not considered to grant fast rates of [[experience]] when processed. In general, higher prices are offered for larger quantities, and the store prices of primary products have little effect on player valuation through market forces. Other factors, such as [[ban]]s of [[macro]]s, tend to play a larger role in affecting price, as they directly affect the market forces (for example, banning macros would decrease supply). The amount of competition over limited resource pools also affects the price with ore rocks, trees, item spawns and monster spawns being examples.

With the release of [[Cape of Accomplishment|Capes of Achievement]], demand for primary products, especially those used in Cooking and Fletching, has increased, as the above are regarded by many players as the easiest skills to train.
====Examples====
*Feathers
*Raw fish
*[[Rune essence|Rune]] and [[Pure essence]]
**With the release of pure essence, normal rune essence is less useful to members (who contributed to the bulk of the demand) and has dropped in price sharply. Members with at least level 30 mining can mine pure essence; however, anyone can buy, sell, or own pure essence regardless of mining level or membership status.
**This is a good example of supply and demand at work, as, with the advent of pure essence, normal essence prices dropped to about 10-20 coins for a while and subsequently increased to 20-35 coins each, while pure essence prices rose to 80-120 coins each. All of these prices can, however, vary depending on the amount that is being bought and sold and whoever is buying or selling. After the introduction of the [[Grand Exchange|Grand Exchange,]] prices soared, mainly because players had, in general, more coins, and because bulk trade became a lot easier using the Exchange. However, since almost all suppliers of rune essence were non-members, there was little pure essence supplied. Due to market forces, the price of pure essence increased, making it considerably more expensive for Runecrafters trying to buy it and process it into high-level runes. Current prices are {{GEPrice|Rune essence}} coins for rune essence and {{GEPrice|Pure essence}} coins for pure essence.
*Coal
**Coal was not very stable in price in the past due to merchanting at Falador bank, but has since stabilized due to a reduction in the number of coal-mining macros. Coal is currently selling for {{GEPrice|Coal}} coins on the Grand Exchange. There is a significant influx of coal from the [[Managing Miscellania]] minigame, most of the time.
*Bars
**The market price for steel bars makes it impossible for buyers to make a profit through Smithing steel unless smithing cannonballs, and the price of most bars is maintained by the fact that they provide concentrated [[Smithing]] [[experience]](thus, demand for them is high).
*Logs, usually used for [[Fletching]], [[Firemaking]], or [[Construction]]
**Willow log prices have declined in [[Rimmington]] due to at least 5 Willow trees being just metres south of the general store. Willow logs at the local general store sell for a minimum of 8 coins and a maximum of 16 coins; their usual price, however, is 8 coins due to high store stock.

===Consumables===
The difference between consumables and primary products is that consumables are used up without necessarily being used to create any other items. The trade in consumables is usually a lot slower than in commodities, since the quantity demanded per transaction is often lower, as players usually only collect enough for a relatively short period of time.

====Examples====
*Food (e.g., cooked fish)
*Runes
**Runes that are the most useful, such as [[Water rune]]s and [[Death rune]]s for [[Ancient Magicks]] and [[Nature rune]]s for [[High Level Alchemy]], have the highest demand.
**Law runes, when bought singly, command prices of over 1000 coins, due to the inconvenience to the seller of selling only one rune. However, they can be bought in bulk at {{GEPrice|Law rune}} coins due to their usefulness in training magic. Also, now that law talismans are tradeable, the prices of law runes are decreasing due to increased supply, making [[Law rune]]s cost a similar amount to [[Nature rune]]s.
**Since the [[Legacy of Seergaze]] quest was released along with the ability to craft [[Blood rune]]s, the price of [[Blood rune]]s has dropped rapidly. They used to cost 500-600 coins each, and are now {{GEPrice|Blood rune}} coins each.
*Arrows
*Potions

===Finished Items===
Since there is little demand for other finished items in bulk quantities, these are normally traded to the stores, or [[high Level Alchemy|"alched"]] if the price makes it profitable to do so. A problem for higher level [[smithing|smithsisthat]]although there may be players who would pay more for Mithril items or above, finding them often takes a long time. As a result, trade in finished items is very slow, and players have developed strategies such as smithing "on demand" to compensate.    
In a departure from real-world economies, finished goods usually fetch lower prices in the Grand Exchange than the components used to make them because there is greater demand for the incomplete article due to the hidden [[experience|experience point]] value than there is for the finished product.

*Clay items
**These are often found as "waste" around the [[Pottery oven]] in [[Gunnarsgrunn]], with a trail of bowls leading from the pottery back to the mine
*Leather items
**In the past, excess leather items (mainly [[Hardleather body|hardleather bodies]]) were often sold to Al Kharid shop for 50 coins each. Since the [[Lumbridge and Draynor Tasks]] were released, players tend to alchemize the leather items using the [[Explorer's ring]], as their alchemy value is actually higher than their store value and [[Magic]] [[experience]] is granted. Nevertheless, the market for leather items is still over-saturated and they are suffering from a perennial depression in Grand Exchange price, down to the low alchemy price.
*Armour and weapons
**Iron and steel armour and weapons are common products of smithing training. They are sold to armour, weapon, and general stores in large amounts every day.
**Adamant armour and weapons, which are usually relatively expensive, are often high alched by members.
*Jewellery
**Jewellery is often sold to the Jewellery stores (at least before the personalized store update), due to the high value it fetches. Players usually sell a large number of amulets or necklaces at once, but some players sell them slowly, the extra coin contributing slightly to price inflation.

===Discontinued and rare items ===
The [[discontinued rare items|discontinued items]] represent an item class of their own. The discontinued items are mostly items that were given years ago in holiday drops, and the decreasing supply coupled with sometimes increasing demand sometimes drives prices up. The drops were intended to just be a fun treat for people who happened to play on the given holiday. However, Jagex found that these items were being hoarded and sold later for much higher prices, due to these items being impossible to obtain after the holiday and therefore rare. In response, Jagex at first stopped all holiday items, but later created a new series of untradeable holiday items, the oldest of which was [[Bunny ears]] released during the [[2003 Easter event]].

Prices of discontinued items are quite volatile and sometimes the market overreacts to certain news. They are sometimes considered a relatively safe long-term investment for those who can afford them because of their scarcity.

Although these items are a relatively safe long-term investment, they are still vulnerable for mass panic, causing major price fluctuations. The November and December 2007 updates to remove real-world trading, including the removal of traditional staking in the old Wilderness, caused the prices of discontinued items to crash. In particular, partyhats could not be sold on the Grand Exchange at the minimum price (without a huge stroke of luck) until sometime in late 2008, and they did not experience a long episode of inflation until the summer of 2009. As of September 2009, the low-level partyhats have only recently reached their peak prices from before the crash in 2007 before the anti-real-world trading updates. "Small rares" followed similar trends.
*[[Partyhat]]s (all colours)
*[[Christmas cracker]]
*[[Halloween mask]]
*[[Santa hat]]
*[[Pumpkin]]
*[[Easter egg]]
*[[Disk of returning]]
*[[Half full wine jug]]

==Availability==
The level of availability of an item also has an effect on the price that another player will offer for it.

The release of the Grand Exchange greatly increased the availability of items to players. For example, before the Grand Exchange, if players wanted to buy bulk quantities of coal, they would either login to a busy world and constantly offer to buy coal with no guarantee of finding players wishing to sell it at that time or location, or search for threads on the forums selling bulk amounts of coal, also with no guarantee of finding a seller. With the Grand Exchange it became possible to buy large quantities of coal within seconds, as in one offer players can easily receive small amounts of coal from hundreds of players.

===Common===
Some items are quite commonly available, but not necessarily at the location they are wanted.

A crafting shop where players can buy moulds close to the furnace where they are used can only be found in [[Al Kharid|Al-Kharid]], for example.

===No store (free world)===
[[Square shield]]s above Mithril, Rune two-handed swords and a few other desirable items in the [[free play|free-to-play]] world have no regular store, so are unavailable except via player trading or high-level [[Smithing|smiths]].

===Rare and pseudo-rare items===
The genuinely rare items are from the early days of RuneScape and may be found among the [[Discontinued rare items|Rares and Holiday Drops]]. In the members' game, rare items are limited to those that can no longer enter the economy due to discontinuation.

There are several pseudo-rare items in the [[free play|free-to-playgame]], which are actually available to members and may be traded and used by free players.   
Some useful items in this category are certain pieces of Black equipment which are unavailable by any means in [[free play|free-to-play]]:

*[[Black hatchet]]
*[[Black scimitar]]
*[[Black warhammer]]

All other black items can be bought from stores, or can be obtained from a monster drop in [[free play|free-to-play]]. Since black items cannot be player-made, it is not possible to smith them. The remaining Black armour and weapons are sold in free-to-play stores and are thus not considered pseudo-rare.

There are also coloured gloves that are cheap for members and can be traded to and worn by free players; however, they do not offer any advantage over plain leather. Several pseudo-rares have lost their status due to updates, however, such as the [[Black full helm]]et, which was a pseudo-rare item before an update caused free-to-play monsters to drop them.

==Controversy about the Grand Exchange==
It is sometimes claimed by players that Jagex controls the prices of items via the Grand Exchange. While this is arguably true in some cases (due to price floors and ceilings set on some items by Jagex), the economy is in general controlled by market forces resulting from the players themselves. Jagex never places offers in the Grand Exchange; all offers are from players (including indirectly through Coinshare). Prices can update daily to reflect changes in supply and demand. However, many items on the Grand Exchange have a set price boundary; that is to say, player supply and demand cannot change a price beyond a certain point. This leads to some items (for example most bronze armour and weaponry) becoming almost unsellable, as there is little demand for them and players rarely wish to purchase these items even for the minimum possible price.

The Grand Exchange has altered the economy of Runescape in many ways; some have been seen as positive, some as negative. While players have criticized it for having a deflationary effect on the economy and leading to price manipulation, it has not led to the end of merchanting, and has also been praised for helping players get items that may have previously been harder to obtain.

The Grand Exchange's biggest contribution is that it provides an efficient way to bring buyers and sellers together without either of them wasting their time. Before the Grand Exchange, a player would have to go to a merchanting world and trade his or her goods there or look on the forums for a buyer/seller. Many goods could also be sold only in large lots - such as flax, which might have been traded only by the hundred or thousand. With the advent of the Grand Exchange, players can save time (and bank space) by having the system sell their items while they leave to play the wider game.

== See also ==
*[[Advanced Trading guide|Merchanting]]
{{WP also|Economy}}

===Further reading===
*[[wikipedia:Economy]]
*[[wikipedia:Political Economy]]
[[Category:Guides]]
[[Category:Economy]]