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Published byAleesha O’Connor’ Modified over 9 years ago
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Supply
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Quantity Supplied Amount of any good or service that sellers are willing and able to sell Law of Supply: Other things equal (ceteris paribus), when the price of a good rises, the quantity supplied of the good also rises, and when the price falls the quantity supplied falls.
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Market vs. Individual Supply Sum the individual supply curves to obtain the market supply curve
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Shifts in Supply 1. Input Prices: If price of an input rises, producing the item is less profitable and the firm supplies less 2. Technology: Innovation reduces labor needed and reduces costs thus the firm supplies more
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Shifts in Supply (cont.) 3. Expectations: If a firm expects price to rise, it will supply less to the market today 4. Number of sellers: self explanatory – more sellers = more supply
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Equilibrium Point where supply and demand curves intersect Creates equilibrium (or market-clearing) price and equilibrium quantity where both buyers and sellers are satisfied
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Shortage vs. Surplus Surplus = Market price is above equilibrium price so there is too much being supplied… price will fall until equilibrium Shortage = Quantity demanded is greater than quantity supplied; market price is below equilibrium price… price will rise to equilibrium
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Shifts affecting Equilibrium Does it shift Demand or Supply or Both?
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