Econ_100_Ch2Part2(1)

# Econ_100_Ch2Part2(1) - ECON 100: Introduction to...

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Slide 1 of 55 ECON 100: Introduction to Microeconomic Theory Lecture 4 Yilan Xu

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Slide 2 of 55 The Supply Curve for Oil Supply represents the behavior of sellers. A Supply Curve is a function that shows the quantity supplied at different prices. § The Quantity Supplied is the quantity that producers are willing and able to sell at a particular price.
Slide 3 of 55 The Supply Curve for Oil The Law of Supply indicates a direct relationship between price and quantity supplied. § When price rises, all else equal, quantity supplied rises. § When price falls, all else equal, quantity supplied falls. Supply curves consistent with the law of supply are upward sloping.

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Slide 4 of 55 Supply Curves The Supply Curve for Oil is a Function Showing the Quantity of Oil Supplied at Different Prices Quantity of Oil (MBD) Price of Oil per Barrel Supply Curve for Oil 50 30 10 \$5 \$20 \$55 Price Quantity Supplied \$55 50 \$20 30 \$5 10
Slide 5 of 55 Supply Curves Supply curves can be read in two ways: § Horizontally: How much suppliers are willing and able to sell at a given price. § Vertically: The minimum price for which suppliers are willing to sell a given quantity. Supply curves, thus, reveal the quantity supplied at a given price, or the minimum price at which suppliers will sell a given quantity.

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Slide 6 of 55 The Supply Curve for Oil Start End Horizontal Reading Quantity of Oil (MBD) Price of Oil per Barrel Supply Curve for Oil 50 30 10 \$5 \$20 \$55
Slide 7 of 55 Supply Curves Vertical Reading Quantity of Oil (MBD) Price of Oil per Barrel Supply Curve for Oil 50 30 10 \$5 \$20 \$55 End Start

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Slide 8 of 55 Supply Curves Why is the supply curve upward sloping ? § The cost of producing a good is not equal across all suppliers. At a low price, a good is produced and sold only by the lowest cost suppliers. At a high price, a good is also produced and sold by higher cost suppliers.
Slide 9 of 55 The Supply Curve for Oil Supply Quantity of Oil (MBD) Price of Oil per Barrel The Supply Curve for Oil 6 0 4 0 2 0 \$6 0 \$4 0 \$2 0 8 0 10 0 Oil Shale Profitable Here Low Cost Oil Higher Cost Oil

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## This note was uploaded on 02/17/2012 for the course ECON 0100 taught by Professor Kenkel during the Spring '08 term at Pittsburgh.

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Econ_100_Ch2Part2(1) - ECON 100: Introduction to...

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