ECON-2110 Lecture Notes - Lecture 5: Economic Surplus, Opportunity Cost
17 Sep 2016
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Document Summary
A supply curve is a function that shows the quantity supplied at different prices. The quantity supplied is the quantity that producers are willing and able to sell at a particular price. The law of supply: there is a direct relationship between price and quantity supplied. When price rises, all else equal, quantity supplied rises and vice versa. Supply curves can be read in two ways: Horizontally: how much suppliers are willing and able to sell at a given price. Vertically: the minimum price for which suppliers are willing to sell a given quantity. The cost of producing a good is not equal across all suppliers. At a low price, a good is produced and sold only by the lowest cost producers. Producer surplus is the producer"s gain from exchange. The difference between the market price and the minimum price at which producers would be willing to sell a given quantity.
