CH 4-5 - CH. 4-5 Unit Cost: Total Cost/Total Output -If the...

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CH. 4-5 Unit Cost : Total Cost/Total Output -If the total output increases more than the total cost (I.e. from technology), it decreases the unit cost. -A monopoly produces a level of output is always less than in a competitive market. -This creates artificial scarcity At equilibrium: You have an equilibrium price, and a corresponding equilibrium quantity. -The demand and supply curves may shift and therefore give you a new equilibrium price. 1. Assume the demand for new homes goes up. What are some reasons? Price for housing is expected to go up, coming out of a recession, a tornado happens, or Chrysler opens a new factory, etc. -When demand goes up and supply stays the same it is a scarcity. The supply then moves up to meet the demand, therefore increasing the price. 2. Supply goes up (changes). What are reasons? The price of land goes down (price of inputs), someone famous moves to the town, etc. 3. Both supply and the demand go up: wants going to happen to equilibrium prices? W much the price is going to be depends on the relative shift of the lines (demand and supply). You don’t always have enough information. Demand usually has to shift a lot
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CH 4-5 - CH. 4-5 Unit Cost: Total Cost/Total Output -If the...

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