Prices of input factorsIf price of an input factor increases, cost of production increases, supply decreases= shift the curve leftExpectations about future pricesIf future prices are expected to increase, supply today decreasesFP are expected to decrease, supply today increases# of SellersSellers increase; supply increaseSellers decrease; supply decreasesMarket Equilibrium- when QD= QS; equilibrium price and equilibrium quantitySurplus- more people are producing than people willing to buy; QS>QDPrice would decrease towards P*; QD increases, QS decreases Shortage- more people are buying than what’s being produces; QS<QDPrice would increase to P*; QD decreases, QS increases
8Changes in Equilibrium Price floor- government regulation that places a lower limit on the price at which a good, service,or FOP may be trade. Ex. Minimum wageIf P floor < P* = non-binding and nothing will happenIf P floor > P* = binding and will have an effectPrice ceiling- regulation that places an upper limit on the price at which a good, service, or FOP may be traded. Ex. Rent controlIf P floor < P* = bindingIf P floor > P*= non- binding
9Chapter 5: GDPGoals: 1.Define GDP and explain why the value of production, income, and expenditure are the same for an economy. 2.Describe how economic statisticians measure GDP and distinguish between nominal GDP and real GDP. 3.Describe the uses of real GDP and explain its limitations as a measure of the standard of living.