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Published byLeonard Ball Modified over 9 years ago
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Chapter 5: Demand and Supply Supply and Shifters of Supply
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Term Review Demand Demand Schedule Demand Curve Income Effect Substitute Effect Law of Diminishing Marginal Utility Substitute Good Complementary Good
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Supply Willingness and ability of sellers to produce and sell goods and services Key Assumption applied to a single supply curve Ceteris paribus – all other things being equal The only variable that changes is price Costs are held constant
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Quantity supplied versus Supply Supply refers to the willingness and ability to supply at each and every price Quantity Supplied refers to the amount that producers are willing to supply at a specific price
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Supply Schedule PriceQuantity Supplied $0.502 $1.005 $1.508 $2.0011 $2.5014
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Law of Supply What did you notice about the relationship between price and quantity supplied? State the Law of Supply in your own words
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Law of Supply As the price goes up, quantity supplied increases As the price goes down, quantity supplied decreases Think: Profit Motive. Sellers want more Revenue Profit = Total Revenue minus Total Costs Higher prices increase total revenue There is a direct or positive relationship between price and quantity supplied. The Supply Curve is upward-sloping
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Movement versus Shifts along the Supply Curve Review: What caused movement along the demand curve? The same thing will cause movement along the supply curve. Market Supply is the sum of all sellers in a market
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Movement along the Supply curve
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Shifts in the Supply Curve
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What causes shifts in the Supply Curve? Change in the cost of inputs Change in the number of producers Natural disasters or major International Events Changes in Technology Changes in Producer Expectations Changes in Government Policy
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