Principles of Economics- Mankiw (5th) 76

Principles of Economics- Mankiw (5th) 76 - 80 PA R T T W O...

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80 PART TWO SUPPLY AND DEMAND I: HOW MARKETS WORK QUICK QUIZ: List the determinants of the quantity of pizza supplied. ± Make up an example of a supply schedule for pizza, and graph the implied supply curve. ± Give an example of something that would shift this supply curve. ± Would a change in the price of pizza shift this supply curve? SUPPLY AND DEMAND TOGETHER Having analyzed supply and demand separately, we now combine them to see how they determine the quantity of a good sold in a market and its price. EQUILIBRIUM Figure 4-8 shows the market supply curve and market demand curve together. Notice that there is one point at which the supply and demand curves intersect; this point is called the market’s equilibrium. The price at which these two curves cross is called the equilibrium price, and the quantity is called the equilibrium quantity. Here the equilibrium price is $2.00 per cone, and the equilibrium quan- tity is 7 ice-cream cones.
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