Supply - change. If they have to pay more for the book,...

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Supply The Graphical Approach The other way in which supply quantity can change is through actual shifts in the supply curve. If you recall when we studied shifts in demand curves, you will remember that such shifts are caused by outside factors. While demand curves are shifted by changes in income or changes in preferences, supply curves can be affected by changes in profit. Profit is how much a firm actually gains when they make a sale. For instance, if a bookstore buys a used book for $1 and sells it for $5, their profit is $4. Changes in the selling price of the book can change how many books they are willing to sell, and such changes would be represented by sliding up and down the same supply curve, as in the previous example. If the price the bookstore has to pay for the book changes, however, that would cause their supply curve to shift, even if the selling price doesn't
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Unformatted text preview: change. If they have to pay more for the book, their profits drop, and make them less willing to sell books at prices they were willing to sell at before the change. We can see this below: Figure %: A Shift in the Supply Curve Notice that for any given price, the store will sell fewer books than before, reflecting the higher costs and lower profits they get for each book. Without changing the price at which they sell the book, we have shifted their supply curve and changed their willingness to sell. Thus, changes in profits can shift a firm's supply curve, even if the market price stays constant. We will later learn how to graphically visualize a firm's profits in a given market by using their different costs, sources of income, and the market price and demand....
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This note was uploaded on 02/09/2012 for the course ECO ECO2013 taught by Professor Jominy during the Fall '08 term at Broward College.

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