301lec2 - 1/7/2010 Supply and the Supply Curve The supply...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
1/7/2010 1 ECON 301 Lecture 2 Professor Sergei Severinov Demand and Supply Consumer Behavior Supply and the Supply Curve • The supply curve is a relationship between the quantity that producers are willing to supply and the price. • The supply curve S shows how the quantity of a good offered for sale changes as the price of the good changes. It is upward sloping: The higher the price, the more firms are able and willing to produce and sell. • We can write this relationship as an equation: Q S = Q S ( P ) The Supply Curve Supply Shift • Shift out: More is supplied at a given price, or suppliers accept a lower price to supply the same quantity • Shift in: Less is supplied at a given price, or supplies accept a lower price to supply the same quantity Factors That Affect Supply • production costs, including wages, interest rates, costs of inputs, such as raw materials. • If production costs fall, firms can produce the same quantity at a lower price or a larger quantity at the same price. • So output increases no matter what the market price happens to be. The entire supply curve thus shifts to the right. Supply and Prices of Other Goods • Increase in the price of a jointly produced good (without a competition for inputs) increases the supply of a good – natural gas and oil are – lumber and wood chips – copper and silver • Increase in the price of a good that is produced from the same inputs decreases the supply of a good: – Military and civilian aircraft
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
1/7/2010 2 Change in Quantity versus change in demand/supply change in the quantity demanded is a movement along the demand curve. change in the quantity supplied is a movement along the supply curve. change in demand refers to shifts in the demand curve change in supply refers to shifts in the supply curve THE MARKET MECHANISM: Supply and Demand Equilibrium: The market clears at price P 0 and quantity Q 0 . At a higher price P 1 , a surplus develops, so price falls. At a lower price P 2 , there is a shortage, so price is bid up. Equilibrium and the Market Mechanism equilibrium (or market clearing) price Price that equates the quantity supplied to the quantity demanded. market mechanism:
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 01/28/2011 for the course ECON 301 taught by Professor Chapple during the Spring '08 term at The University of British Columbia.

Page1 / 6

301lec2 - 1/7/2010 Supply and the Supply Curve The supply...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online