1 / 20

September 25, 2013

September 25, 2013. Review Demand Packet Notes: Supply Video Clips? Supply and Demand Curves HW: Supply Packet. Supply. Schedule or curve Amount producers are willing and able to sell at a given price Individual supply Market supply. 3- 2. LO2. Law of Supply.

verlee
Télécharger la présentation

September 25, 2013

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. September 25, 2013 • Review Demand Packet • Notes: Supply • Video Clips? Supply and Demand Curves HW: Supply Packet

  2. Supply • Schedule or curve • Amount producers are willing and able to sell at a given price • Individual supply • Market supply 3-2 LO2

  3. Law of Supply • Other things equal, as the price rises, the quantity supplied rises and as the price falls, the quantity supplied falls. • Reason: • Price acts as an incentive to producers • Costs will rise! 3-3 LO2

  4. The Supply Curve 5 4 3 2 1 0 P S Price (per bushel) Q 10 20 30 40 50 60 70 Quantity supplied (bushels per week) 3-4 LO2

  5. Changes in Supply P S3 S1 $6 5 4 3 2 1 0 Decrease in supply S2 Price (per bushel) Increase in supply Q 2 4 6 8 10 12 14 16 Quantity supplied (thousands of bushels per week) 3-5 LO2

  6. Changes in Supply P Change in Quantity Supplied S3 S1 $6 5 4 3 2 1 0 S2 Price (per bushel) Change in Supply Q 2 4 6 8 10 12 14 16 Quantity supplied (thousands of bushels per week) 3-6 LO2

  7. Determinants of Supply“Supply Shifters” • What if the “All other things equal” assumption changes??? • Cost is the #1 Factor in Supply! • A change in resource prices • A change in technology • A change in the number of sellers • A change in taxes (a cost) and subsidies (tax in reverse) • A change in prices of other goods • A change in producer expectations 3-7 LO2

  8. Market Equilibrium • Equilibrium occurs where the demand curve and supply curve intersect. • Surplus and shortage • Rationing function of prices • Efficient allocation • Productive efficiency • Allocative efficiency 3-8 LO3

  9. Market Equilibrium 200 Buyers & 200 Sellers Market Supply 200 Sellers Market Demand 200 Buyers 6 5 4 3 2 1 0 6,000 Bushel Surplus S P Qd P Qs 2,000 4,000 7,000 11,000 16,000 $5 4 3 2 1 $5 4 3 2 1 12,000 10,000 7,000 4,000 1,000 Price (per bushel) 3 7,000 Bushel Shortage D 2 4 6 8 10 12 14 16 18 7 Bushels of Corn (thousands per week) 3-9 LO3

  10. Rationing Functions of Prices • The ability of the competitive forces of demand and supply to establish a price at which selling and buying decisions are consistent. 3-10 LO3

  11. Efficient Allocation • Productive efficiency • Producing goods in the least costly way • Using the best technology • Using the right mix of resources • Allocative Efficiency • Producing the right mix of goods • The combination of goods most highly valued by society 3-11 LO3

  12. ` ` Changes in Demand and Equilibrium Changes in Demand and Equilibrium D increase: P, Q D decrease: P, Q P P S S D2 D3 D1 D4 0 0 Decrease in demand Increase in demand 3-12 LO4 LO4

  13. ` ` Changes in Supply and Equilibrium Changes in Demand and Equilibrium S increase: P, Q S decrease: P, Q P P S1 S4 S3 S2 D D 0 0 Decrease in supply Increase in supply 3-13 LO4 LO4

  14. Complex Cases 3-14 LO4

  15. Government Set Prices • Price Ceilings • Set below equilibrium price • Rationing problem • Black markets • Example: Rent control 3-15 LO5

  16. Government Set Prices P S $3.50 P0 ceiling 3.00 PC D Shortage Q Qs Q0 Qd 3-16 LO5

  17. Government Set Prices • Price Floors • Prices are set above the market price • Chronic surpluses • Example: Minimum wage laws 3-17 LO5

  18. Government Set Prices P S Surplus floor $3.00 Pf P0 2.00 D Q Qd Q0 Qs 3-18 LO5

  19. Legal Market for Human Organs • What if we created a legal market for human organs? • Positive effects • Increase the incentive to donate • Eliminate the persistent shortage of eyes, livers, hearts, kidneys, etc. 3-19

  20. Legal Market for Human Organs • Negative effects • Increases the cost of medical care • Diminishes the special nature of life by commercializing it 3-20

More Related