1 / 14

Understanding Supply and Demand Equilibrium in Competitive Markets

Learn about supply and demand dynamics, supply shifters, and equilibrium in competitive markets. Explore how price affects quantity supplied, supply curve shifts, and the concept of market equilibrium. Master the key concepts in AP Economics.

evan-jimenez
Télécharger la présentation

Understanding Supply and Demand Equilibrium in Competitive Markets

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. AP Economics Mr. Bernstein Module 6: Supply and Demand – Supply and Equilibrium October 7, 2014

  2. AP EconomicsMr. Bernstein Competitive Markets • An institution which brings together buyers and sellers of particular goods or services • Local, national or international • Face-to-face, electronic or other impersonal • Assumption: no buyer or seller so large they affect pricing • Will look at markets which are not perfectly competitive later in the course

  3. AP EconomicsMr. Bernstein Supply Schedule and Supply Curve

  4. AP EconomicsMr. Bernstein Law of Supply • All other things equal, as price increases the quantity supplied rises • So there is an direct relationship between price and quantity supplied • Plotted on a graph, the law of demand infers an upward sloping supply curve • Note: It will be important to distinguish between a change in the “quantity supplied” and a change in “supply”

  5. AP EconomicsMr. Bernstein Supply Shifters • Factors which change supply other than price • An increase in supply shifts the supply curve to the right • A decrease in supply shifts the supply curve to the left • Notice an increase in supply shifts the supply curve horizontally, not vertically

  6. AP EconomicsMr. Bernstein A Shift in Supply is different from movement along the Supply Curve!!

  7. AP EconomicsMr. Bernstein A Shift in Supply is different from movement along the S Supply Curve!!

  8. AP EconomicsMr. Bernstein Supply Shifters • Input or Resource prices • Increase in the price of inputs causes a decrease in the quantity supplied • Prices of related goods • Increase in the price of Substitute Goods’ price causes a decrease in the quantity supplied (production shifts to higher price substitute product) • Technology • Advances in technology increases the quantity supplied

  9. AP EconomicsMr. Bernstein Supply Shifters, cont. • Expectations • Expectations of future price increases decreases the quantity supplied today • Number of producers • More producers increase the quantity supplied

  10. AP EconomicsMr. Bernstein Supply Shifters: T - RICE • Technology • Related prices (substitutes, compliments) • Input prices • Competition (number of producers) • Expectations

  11. AP EconomicsMr. Bernstein Equilibrium • Equilibrium is the point where no buyers or sellers would be better off changing price or quantity • AKA “Market-clearing” price • Market prices are like a pendulum, swinging back and forth. At equilibrium, they are stable

  12. AP EconomicsMr. Bernstein Equilibrium: Where Supply and Demand Curves Intersect

  13. AP EconomicsMr. Bernstein Equilibrium Prices Fall When There is a Surplus

  14. AP EconomicsMr. Bernstein Equilibrium Prices Rise When There is a Shortage

More Related