Notes 9-25

Notes 9-25 - Lecture VI Notes For Sept 25, 2006 More...

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Lecture VI Notes For Sept 25, 2006 More Marshalian Cross I. Time Period & the Shape of Demand & Supply Curves II. Effects of Specific Taxes On Market Equilibrium III. Effects of Ad Valorem Taxes on Market Equilibrium I. Time Period & the Shape of Demand & Supply Curves A. As Consumers find substitutes: demand flattens B. Short run supply: number of firms fixed, steep curve C. Long run supply: new firms enter supply flat s ShortRun $/Q S LongRun P* d ShortRun D LongRun Q* Q D. Short & long run effects of supply decrease to S’ s ShortRun S’ LongRun $/Q S LongRun P’ S P’ L P* d ShortRun LongRun Q’ L q’ S Q* Q E. In the short run, decrease in supply raises price
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along the short run demand curve to q’, p’ F. In the long run, decrease in supply acts along the long run demand curve to long run equilibrium at Q’, P’ II. Effects of a Specific Tax On Market Equilibrium A. Specific taxes expressed as $ per unit sold $0.25 cents per gallon of gasoline - shift supply B. Tax means that buyers pay based on a "gross of tax" supply curve that is shifted up by the amount of tax.
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Notes 9-25 - Lecture VI Notes For Sept 25, 2006 More...

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