When any other influence on selling plans changes

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Unformatted text preview: ange in supply. An increase in supply shifts the supply curve rightward (from S0 to S1), and a decrease in supply shifts the supply curve leftward (from S0 to S2). animation Review Quiz ◆ 1 2 3 4 5 Define the quantity supplied of a good or service. What is the law of supply and how do we illustrate it? What does the supply curve tell us about the producer’s minimum supply price? List all the influences on selling plans, and for each influence, say whether it changes supply. What happens to the quantity of cell phones supplied and the supply of cell phones if the price of a cell phone falls? Work Study Plan 3.3 and get instant feedback. Now we’re going to combine demand and supply and see how prices and quantities are determined. 9160335_CH03_p053-080.qxd 64 6/22/09 8:56 AM Page 64 CHAPTER 3 Demand and Supply ◆ Market Equilibrium ■ ■ Price regulates buying and selling plans. Price adjusts when plans don’t match. Price (dollars per bar) We have seen that when the price of a good rises, the quantity demanded decreases and the quantity supplied increases. We are now going to see how the price adjusts to coordinate the plans of buyers and sellers and achieve an equilibrium in the market. An equilibrium is a situation in which opposing forces balance each other. Equilibrium in a market occurs when the price balances the plans of buyers and sellers. The equilibrium price is the price at which the quantity demanded equals the quantity supplied. The equilibrium quantity is the quantity bought and sold at the equilibrium price. A market moves toward its equilibrium because FIGURE 3.7 Equilibrium 3.00 Surplus of 6 million bars at $2.00 a bar 2.50 2.00 Equilibrium 1.50 1.00 Demand for energy bars Shortage of 9 million bars at $1.00 a bar 0.50 0 5 10 Price as a Regulator The price of a good regulates the quantities demanded and supplied. If the price is too high, the quantity supplied exceeds the quantity demanded. If the price is too low, the quantity demanded exceeds the quantity supplied. There is one price at whi...
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This note was uploaded on 04/04/2012 for the course ECON 251 taught by Professor Blanchard during the Spring '08 term at Purdue.

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