91207 - when demand increases, price increases and quantity...

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Econ, Wed 9/12/07 Read articles for Friday Marginal Cost=MC=∆TC/∆Q Total Cost=TC=TFC+TVC Total Fixed Cost, Total Variable Cost MC=∆TFC/∆Q + ∆TVC/∆Q MC=∆TVC/∆Q TVC=Wage Rate(W) x ∆L MC=W∆L/∆Q MC=W/MPL, MPL Marginal Product of Labor Things that will shift the market supply curve: Determinants of Supply 1. ∆ Input Price 2. ∆ Technology 3. ∆ # of sellers 4. ∆ in expectations of any of the listed above, or price sometimes price not in equilibrium as price is falling, q supply deacreases, q demanded increases:
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Three steps to analyzing changes in Eq’m - To det. the effecgts of any event, - 1. Decide whether event shifts S curve, or D curve, or both - 2. decide in which direction it shifts - 3. use supply-demand diagram to see how the shift changes eq’m P & Q
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Unformatted text preview: when demand increases, price increases and quantity increases: see chicken when supply decreases, price increases and quantity decreases ***********The change in quantity in ambiguous. CHANGES IN SUPPLY AND DEMAND event a : a fall in the prices steps: 1. D curve shifts LEFT event b : sellers of music download negotiate a reduction in the royalties they must pay for each song the sell step 1. S curve shifts RIGHT step 2. P falls, Q rises. event c : events a & b both occur step 1. both curves shift step 2. D shifts LEFT, S shifts RIGHT step 3. P unamibiguously falls. Effects on Q is ambiguous. The fall in demand reduces Q1, the increase in supply increases Q....
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91207 - when demand increases, price increases and quantity...

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