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Unformatted text preview: • Law of Supply o All else equal, direct, positive relationship between P and Qs (Quantity supplied) o P↑=»Qs↓ o P↓ =»Qs↑ • Put demand and supply together o How do buyers and sellers interact? • Demand curves to not have to be straight to follow the law of demand o they just have to be downward sloping • P=$2.50: Qd›Qs : Shortage o Long lines, empty shelves o =»upward pressure on price o P=$5: Qs › Qd: Surplus Unsold product Bulging warehouses • =» downward pressure on price • Equilibrium: 1. P-Q combination at which Qs= Qd 2. No surplus, no shortage 3. No pressure for price change 4. Equilibrium : intersection of supply and demand curves • What if new D or new S? o Aids advisory 1987 o Sale of latex gloves as a result of bodily fluid transmitted disease o As a result sales rise...
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This note was uploaded on 04/19/2011 for the course EC 201 taught by Professor Ballard during the Fall '08 term at University of Michigan.
- Fall '08