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
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
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
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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