Econ101September10 - c EQUATION i Q = X P ii...

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Econ 101 SEPTEMBER 10, 2007 I. Supply and Demand model is the workhouse of Economics II. SUPPLY a. VERBAL: Describes the positive relation between the price of a good and the maximum quantity that producers are willing to sell at that price i. Ex.) When price falls from $25 to $10, the seller only wants to supply 4 instead of 10 objects to be sold ii. Direct relationship iii. When supply increases, the quantity supplied by producers increases at every price iv. Increase in supply NOT the same as movement along the supply curve b. i. When the quantity supplied changes, but the curve is not altered, this is called a change in supply ii. This is NOT an increase or decrease in supply, simply a CHANGE
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Unformatted text preview: c. EQUATION: i. Q = X + P ii. Increase/decrease in supply 1. Q = 3 + P Q = 10 + P (Increase) 2. Q = 3 + P Q = -4 + P (Decrease) III. DEMAND a. VERBAL: Describes negative relation between price of good and the maximum quantity that consumers are willing to buy at that price i. Inverse relationship ii. Increase in demand/ Decrease in Demand: Curve shifts up/Down b. EQUATION: i. Q = 40 – P ii. Increase/Decrease: Q = 50 – P v. Q = 30 – P IV. MARKET EQUILIBRIUM a. When quantity demanded equals quantity supplied b. Set equations equal to each other and solve (with respect to P) i. Ex.) 40 – P = 10 + P...
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