Econ 102 Notes

Econ 102 Notes - Supply and Demand Part 2 Keith S. Evans...

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Unformatted text preview: Supply and Demand Part 2 Keith S. Evans Iowa State University January 27, 2009 Keith S. Evans (Iowa State University) Supply and Demand Part 2 January 27, 2009 1 / 42 Today we will touch on some key topics: Supply versus Quantity Supplied Market Equilibrium Market Interventions Keith S. Evans (Iowa State University) Supply and Demand Part 2 January 27, 2009 2 / 42 Quantity Supplied - Q s Definition The quantity supplied is the amount of a good or service that a firm is willing and able to supply at a given price. In this course, we will us Q s to denote quantity demanded. Keith S. Evans (Iowa State University) Supply and Demand Part 2 January 27, 2009 3 / 42 Supply schedules Definition The supply schedule is a table that shows the relationship between the price of a product and the quantity of the product supplied. Supply of iPhones Price Q s ($ per phone) (Millions of phones per month) 800 60 700 50 600 40 500 35 400 25 300 15 200 Keith S. Evans (Iowa State University) Supply and Demand Part 2 January 27, 2009 4 / 42 The Supply Curve Definition The supply curve shows the quantity of a good or service that producers are willing and able to sell at each given price. NOTE: Supply describes the behavior of sellers at every price, where quantity supplied describes the behavior at a particular price. Keith S. Evans (Iowa State University) Supply and Demand Part 2 January 27, 2009 5 / 42 Individual Supply Each seller in the market has their own supply. This individual supply denotes their willingness to accept. Individual Supply of Umbrellas Price Q d ($ per unit) (# per wk) U-Shop 2.50 25 2.00 17 1.80 13 1.60 10 1.40 3 1.00 Keith S. Evans (Iowa State University) Supply and Demand Part 2 January 27, 2009 6 / 42 Individual Supply Goal of firm: maximize profit- π = P · Q s- C ( Q s ). In a perfect competition, the firm takes price as given Set Q s such that MR = MC Keith S. Evans (Iowa State University) Supply and Demand Part 2 January 27, 2009 7 / 42 Individual Supply to Market Supply Definition market supply is the sum of all firms supply curves for a good or service. Price Q d Q d Q d Q d ($ per unit) (# per wk) (# per wk) (# per wk) (# per wk) U-Shop Rain-E-Daze Silver Lining Total 2.50 25 20 25 70 2.00 17 13 16 46 1.80 13 9 12 34 1.60 10 5 6 21 1.40 3 1 4 1.00 Keith S. Evans (Iowa State University) Supply and Demand Part 2 January 27, 2009 8 / 42 Law of Supply There is a general upward slope to market supply. Definition The law of supply is the rule that, holding everything else constant, increase in price cause increased in quantity supplied, and decreases in price cause decrease in quantity supplied. A change in price causes a change in quantity supplied....
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This note was uploaded on 08/31/2011 for the course ECON 102 taught by Professor Singerman during the Spring '08 term at Iowa State.

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Econ 102 Notes - Supply and Demand Part 2 Keith S. Evans...

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