Supply and Demand_f09

Supply and Demand_f09 - e ? P D S Q e P e At A Price Below...

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    Supply and Demand The Building Blocks
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    Demand   The quantity of a good or service that consumers  are willing and able to buy at a given set of  prices over a given period of time  This is a  flow  – it changes over time We will encounter  stocks  later
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    Demand Curve Slopes Down Price is a cost Suppose the price of  scones falls Income Effect You can now buy more of  everything Substitution Effect You buy more scones and  fewer doughnuts P D Q
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    Supply   The quantity of a good or service that producers  are willing and able to sell at a given set of  prices over a given period of time  This is also a  flow
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    Supply Curve Slopes Up Price a reward  If price of scones rises Current producers make  more  New producers attracted P S Q
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    Equilibrium! P e  has two basic qualities “Everyone” is happy Why the quotation marks? No tendency to change What happens away from P
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Unformatted text preview: e ? P D S Q e P e At A Price Below Equilibrium Who is unhappy at P L ? Consumers are frustrated Willing and able to buy Cannot buy What changes? Prices rise Producers can charge more Consumers willing to pay more What does price ceiling do? P D S Q e P e P L At a Price Above Equilibrium Who is unhappy at P H ? Producers Willing and able to sell But Cannot sell What changes? Prices fall Consumers can pay less Producers willing to charge less What does price floor do? P D S Q e P e P H Changes in Equilibrium What happens to P e of sushi if: Bono says tuna fishing kills dolphins people worry about cholesterol and stop eating meat Overfishing reduces tuna catches Technological progress increases rice yields The economy begins to grow again...
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Supply and Demand_f09 - e ? P D S Q e P e At A Price Below...

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