ECO-4 Lecture Notes - Lecture 4: Demand Curve, Reservation Price, Economic Equilibrium

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7 Aug 2020
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Definition: representation of the relationship between the amount of a good or service that sellers want to supply in a given time period and price. Seller"s reservation price: smallest dollar amount for which a seller would be willing to sell an additional unit, generally equal to marginal cost. Horizontal interpretation of the supply curve and vertical interpretation of the supply curve are the same as with the demand curve. Definition: any situation in which a system is at rest i. e. when neither the price nor the quantity has a tendency to change. Equilibrium price and equilibrium quantity: value of price and quantity for which quantity demanded = quantity supplied. At equilibrium, no buyer or seller has any reason to alter their behaviour. Market equilibrium does not necessarily produce an ideal outcome for everyone: buyers with extremely low incomes often have difficulties purchasing basic goods and services government regulation. Price ceiling: maximum allowable price specified by law e. g. rent control.

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