Supply1 - to accept for its products. Most firms will sell...

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Supply The Graphical Approach There are two ways that supply quantity can change: one is through movements along the same supply curve, the other is through shifts in the supply curve. Let's look at the first one: movements along one supply curve. Movements along one supply curve follow the same idea as movements along a single demand curve: nothing is changing except for the price of the good, so the only thing influencing supply is a change in price. With all else being equal, we can see how James might change how much he is willing to tutor when his wage rises or falls in the following graph: Figure %: James's Supply Curve Note that when the wage is higher, the quantity supplied is higher, and vice versa. The reservation price (or in this case, the reservation wage) is the lowest price that a seller is willing
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Unformatted text preview: to accept for its products. Most firms will sell products up to the point where their profits are 0, or where the amount they spend to make and sell the product is equal to the amount they receive for the product on the market. To find the reservation wage on James's supply curve, find the point where his quantity supplied will be 0. The reservation price will be marginally higher than the price at Q = 0. If we assume that James can only tutor in hourly increments (that is, he can't tutor for less than an hour), then his reservation wage will be the wage at which he will only tutor for one hour. On the graph, it looks like James's reservation wage will be about $10/hour....
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