Chapter 4 - odd numbers_Part1.pdf

The supply schedule and the supply curve are related

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price and quantity supplied. The supply schedule and the supply curve are related because the supply curve is simply a graph showing the points in the supply schedule. 9 A change in producers technology leads to a shift in the supply curve, because technology is on neither axis. A change in price leads to a movement along the supply curve. 11 When the price of beer rises, the demand for pies declines. The reason is that beer and pies are complements and the quantity of beer demanded decreases so ceteris paribus people also want to buy fewer pies. When we say the demand for pies declines, we mean that the demand curve for pies shifts to the left as in Figure 4.5 below. Note that price of beer is on neither axis of the pie market diagram. The supply curve for pies isn’t affected. With a shift to the left of the demand curve, the equilibrium price and quantity both decline, as the figure shows. Thus the quantity of pies supplied and demanded both fall. In summary, supply is unchanged, demand is decreased, quantity supplied declines, quantity demanded declines, and the price falls.
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