Lecture 6 Notes

Lecture 6 Notes - ECN 211 Macroeconomic Principles L6:...

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1 ECN 211 Macroeconomic Principles L6: Supply and Equilibrium
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Algebra- Supply Curve Simple:  Qs = 2P-100 Ex: If price is $150 then quantity supplied is? A) Qs = 2(150)-100=200 Note: as P is on the vertical axis we usually look at  (inverse) supply curves: P = 50+0.5 Qs 2
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Translating into table form 3 Price Quantity Supplied $350 600 $300 500 $250 400 $200 300 $150 200 $100 100 $50 0 Remember: P = 50+0.5Qs
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Translating into a  Diagram 4 Price Quantity Supplied Supply $300 $50 500 600 Remember: P = $350 50+0.5Qs
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Complicated: Supply for good X: Qs x  = 0.5P  - 0.25Wage  + 0.6Prod - 100 If the price of good X is $400, wages are $100 and  prductivity is 40 what is the quantity supplied of good X? Qs x  = 0.5(400)-0.25(100)+0.6(40)-100 Qs x =200-25+24-100 5
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6 Equilibrium In equilibrium, quantity demand equals quantity supplied $5 20 Price Quantity $10 10 S D 15 $7.50 Equilibrium
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7 Reaching Equilibrium Price is the mechanism by which supply and demand equilibrate $5 20 Price Quantity $10 10 S D 15 $7.50 Excess Supply Excess Demand
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This note was uploaded on 03/03/2010 for the course ECN 211 taught by Professor Kingston during the Spring '08 term at ASU.

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Lecture 6 Notes - ECN 211 Macroeconomic Principles L6:...

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