Principles of Economics- Mankiw (5th) 80

Principles of Economics- Mankiw (5th) 80 - 84 PA R T T W O...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
84 PART TWO SUPPLY AND DEMAND I: HOW MARKETS WORK “Supply” refers to the position of the supply curve, whereas the “quantity sup- plied” refers to the amount suppliers wish to sell. In this example, supply does not change because the weather does not alter firms’ desire to sell at any given price. In- stead, the hot weather alters consumers’ desire to buy at any given price and thereby shifts the demand curve. The increase in demand causes the equilibrium price to rise. When the price rises, the quantity supplied rises. This increase in quan- tity supplied is represented by the movement along the supply curve. To summarize, a shift in the supply curve is called a “change in supply,” and a shift in the demand curve is called a “change in demand.” A movement along a fixed supply curve is called a “change in the quantity supplied,” and a movement along a fixed demand curve is called a “change in the quantity demanded.” Example: A Change in Supply
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.
Ask a homework question - tutors are online