Chapter 8 - Market Equilibrium and Market Demand Perfect...

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Market Equilibrium and Market Demand: Perfect Competition Chapter 8
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Discussion Topics Derivation of market supply curve Elasticity of supply and producer surplus Market equilibrium under perfect competition Total economic surplus Adjustments to market equilibrium
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Page 123 P=MR=AR Remember the firm’s supply curve?
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Page 162 Firm’s supply curve starts at shut down level of output P=MR=AR
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Page 162 Profit maximizing firm will desire to produce where MC=MR P=MR=AR
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Page 162 Economic losses will occur beyond output O MAX , where MC > MR P=MR=AR
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Market supply curve can be thought of as the horizontal summation of the supply decisions of all firms in the market. Here, at a price of $1.50, Gary would supply 2 tons of broccoli and Ima would supply 1 ton, giving a market supply of 3 tons. Page 163 Building the Market Supply Curve
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Market supply curve can be thought of as the horizontal summation of the supply decisions of all firms in the market. Here, at a price of $1.50, Gary would supply 2 tons of broccoli and Ima would supply 1 ton, giving a market supply of 3 tons. + Page 163 Building the Market Supply Curve
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Market supply curve can be thought of as the horizontal summation of the supply decisions of all firms in the market. Here, at a price of $1.50, Gary would supply 2 tons of broccoli and Ima would supply 1 ton, giving a market supply of 3 tons. + = Page 163 Building the Market Supply Curve
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Merging Demand and Supply Price Quantity D S P E Q E Market clearing price
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Merging Demand and Supply Price Quantity D S P E Q E Chapters 3-5
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Merging Demand and Supply Price Quantity D S P E Q E Factors that change demand: Other prices Consumer income Tastes and preferences Real wealth effect Global events D* Q E* P E*
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Merging Demand and Supply Price Quantity D S P E Q E Chapters 6-7
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Merging Demand and Supply Price Quantity D S P E Q E Factors that change supply: Input costs Government policy Price expectations Weather & disease Global events Q E* P E* S*
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Concept of Producer Surplus Producer surplus is a fancy term economists use for profit . We measure producer surplus as the area above the supply curve and below the market equilibrium price.
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