Principles of Economics- Mankiw (5th) 75

Principles of Economics- Mankiw (5th) 75 - ± Figure 4-6 M...

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CHAPTER 4 THE MARKET FORCES OF SUPPLY AND DEMAND 79 Table 4-6 lists the variables that determine the quantity supplied in a market and how a change in the variable affects the supply curve. Once again, price plays a special role in the table. Because price is on the vertical axis when we graph a supply curve, a change in price does not shift the curve but represents a movement along it. By contrast, when there is a change in input prices, technology, expecta- tions, or the number of sellers, the quantity supplied at each price changes; this is represented by a shift in the supply curve. In summary, the supply curve shows what happens to the quantity supplied of a good when its price varies, holding constant all other determinants of quantity supplied. When one of these other determinants changes, the supply curve shifts. Market Supply ( ± 3 ² 4) Price of Ice-Cream Cone 0 1 2 3 4 5 6 7 8 9 10 11 12 Quantity of Ice-Cream Cones $3.00 1.50 2.00 2.50 1.00 0.50
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Unformatted text preview: ± Figure 4-6 M ARKET S UPPLY AS THE S UM OF I NDIVIDUAL S UPPLIES . The market supply curve is found by adding horizontally the individual supply curves. At a price of $2, Ben supplies 3 ice-cream cones, and Jerry supplies 4 ice-cream cones. The quantity supplied in the market at this price is 7 cones. Table 4-6 T HE D ETERMINANTS OF Q UANTITY S UPPLIED . This table lists the variables that can influence the quantity supplied in a market. Notice the special role that price plays: A change in the price represents a movement along the supply curve, whereas a change in one of the other variables shifts the supply curve. V ARIABLES T HAT A FFECT Q UANTITY S UPPLIED A C HANGE IN T HIS V ARIABLE . . . Price Represents a movement along the supply curve Input prices Shifts the supply curve Technology Shifts the supply curve Expectations Shifts the supply curve Number of sellers Shifts the supply curve...
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