Supply - Supply The quantity supplied of any good is the...

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THE MARKET FORCES OF SUPPLY AND DEMAND 1 Supply The quantity supplied of any good is the amount that sellers are willing and able to sell. Law of supply : the claim that the quantity supplied of a good rises when the price of the good rises, other things equal
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THE MARKET FORCES OF SUPPLY AND DEMAND 2 The Supply Schedule Supply schedule : A table that shows the relationship between the price of a good and the quantity supplied. Example: Starbucks’ supply of lattes. Notice that Starbucks’ supply schedule obeys the Law of Supply. Price of lattes Quantity of lattes supplied $0.00 0 1.00 3 2.00 6 3.00 9 4.00 12 5.00 15 6.00 18
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THE MARKET FORCES OF SUPPLY AND DEMAND 3 $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 0 5 10 15 Price of lattes Quantity of lattes supplied $0.00 0 1.00 3 2.00 6 3.00 9 4.00 12 5.00 15 6.00 18 P Q
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Market Supply versus Individual Supply The quantity supplied in the market is the sum of the quantities supplied by all sellers at each price. Suppose Starbucks and Jitters are the only two sellers in this market. ( Q s = quantity supplied) 18 15 12 9 6 3 0 Starbucks 12 10 8 6 4 2 0 Jitters + + + + = = = = 30 25 20 15 + = 10 + = 5 + = 0 Market Q s $0.00 6.00 5.00 4.00 3.00 2.00 1.00 Price 4
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THE MARKET FORCES OF SUPPLY AND DEMAND 5 $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 0 5 10 15 20 25 30 35 P Q The Market Supply Curve P Q S (Market) $0.00 0 1.00 5 2.00 10 3.00 15 4.00 20 5.00 25 6.00 30
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THE MARKET FORCES OF SUPPLY AND DEMAND 6 Supply Curve Shifters The supply curve shows how price affects quantity supplied, other things being equal . These “other things” are non-price determinants of supply. Changes in them shift the S curve…
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THE MARKET FORCES OF SUPPLY AND DEMAND 7 Supply Curve Shifters:   Input Prices Examples of input prices: wages, prices of raw materials. A fall in input prices makes production more profitable at each output price, so firms supply a larger quantity at each price, and the S curve shifts to the right.
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THE MARKET FORCES OF SUPPLY AND DEMAND 8 $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 0 5 10 15 20 25 30 35 P Q Suppose the price of milk falls. At each price, the quantity of Lattes supplied will increase (by 5 in this example). Supply Curve Shifters:   Input Prices
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THE MARKET FORCES OF SUPPLY AND DEMAND 9 Supply Curve Shifters:   Technology Technology determines how much inputs are required to produce a unit of output. A cost-saving technological improvement has the same effect as a fall in input prices, shifts S curve to the right.
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THE MARKET FORCES OF SUPPLY AND DEMAND 10 Supply Curve Shifters:   # of Sellers     An increase in the number of sellers increases the quantity supplied at each price, shifts S curve to the right.
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THE MARKET FORCES OF SUPPLY AND DEMAND 11 Supply Curve Shifters:   Expectations   Example: Events in the Middle East lead to expectations of higher oil prices. In response, owners of Texas oilfields reduce
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Supply - Supply The quantity supplied of any good is the...

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