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Chap003.12 - Air Travel and Corn Markets Price($/bushel...

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12 Chapter 3 - Supply and Demand: An Introduction Slide 67 Predicting and Explaining Changes in Prices and Demand ± Factors That Cause an Increase (rightward or upward shift) in Supply 3. An improvement in the weather, especially for agricultural products 4. An increase in the number of suppliers 5. An expectation of lower prices in the future Chapter 3 - Supply and Demand: An Introduction Slide 68 Predicting and Explaining Changes in Prices and Demand ± Economic Naturalist z Why do the prices of some goods, like airline tickets to Europe, go up during the months of heaviest consumption, while others, like corn, go down? Chapter 3 - Supply and Demand: An Introduction Slide 69 Seasonal Variation in Air Travel and Corn Markets Price ($/ticket) 1000s of tickets S D S D W Q W Q S P W P S High Consumption due to High Demand Chapter 3 - Supply and Demand: An Introduction Slide 70 Seasonal Variation in
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Unformatted text preview: Air Travel and Corn Markets Price ($/bushel) Millions of bushels S W D Q W Q S P W P S S S High Consumption due to High Supply Chapter 3 - Supply and Demand: An Introduction Slide 71 Markets and Social Welfare ± If all exchange is purely voluntary, then the buyer’s reservation price exceeds the seller’s reservation price and both the buyer and seller receive an economic surplus. Chapter 3 - Supply and Demand: An Introduction Slide 72 Markets and Social Welfare ± Buyer’s surplus z The difference between the buyer’s reservation price and the price he or she actually pays. ± Seller’s surplus z The difference between the price received by the seller and his or her reservation price. ± Total surplus z The difference between the buyer’s reservation price and the seller’s reservation price....
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