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Lecture 6 - of the product supplied by a firm • Law of...

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Lecture 6 2/12/08 Demand Curve: shows the relationship between the price of a product and the quan- tity of the product demanded Law of Demand Ceteris Paribus P = Q.D P = Q.D Change in Quantity Demanded: Movement along curve What explains law of demand Substitution Effect: Change in relative prices of substitutes Income Effect: Change in purchasing power Supply Curve: Shows the relationship between the price of a product and the quantity
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Unformatted text preview: of the product supplied by a firm. • Law of Supply Ceteris Paribus • ↑ P = ↑ Q.S • ↓ P = ↓ Q.S • Change in Quantity supplied: movement along curve • What Explains Law of Supply • ∏ (profit) = P*Y - Cost of Production • ↑ ↑ • ➘ ↑ Labor = ↑ Y • Price = What you give up (Opportunity Cost)...
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