Principles of Economics- Mankiw (5th) 78

Principles of Economics- Mankiw (5th) 78 - 82 PA R T T W O...

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82 PART TWO SUPPLY AND DEMAND I: HOW MARKETS WORK Price of Ice-Cream Cone 2.00 $2.50 04 7 1 0 Quantity of Ice-Cream Cones Supply Demand (a) Excess Supply Quantity demanded Quantity supplied Surplus Price of Ice-Cream Cone $2.00 1.50 7 1 0 Quantity of Ice-Cream Cones Supply Demand (b) Excess Demand Quantity supplied Quantity demanded Shortage Figure 4-9 M ARKETS N OT IN E QUILIBRIUM . In panel (a), there is a surplus. Because the market price of $2.50 is above the equilibrium price, the quantity supplied (10 cones) exceeds the quantity demanded (4 cones). Suppliers try to increase sales by cutting the price
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This note was uploaded on 07/30/2010 for the course ECON 120 taught by Professor Abijian during the Spring '10 term at Mesa CC.

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