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ECON 1020 (99)
Lecture 7

ECON 1020 Lecture 7: Lecture 7

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University of Manitoba
ECON 1020
Ryan A.Compton

o82 Subsidies: supply increases because it costs less Price of other goods If the demand and price of other goods increases, one might switch to produce the good that is in high demand and high price Ex: if you produce doughnuts and danishes increase in demand and price, one might switch production to make danishes, making the supply curve for doughnuts decreases and the supply curve for danishes increases Producers expectations Market Equilibrium: Equilibrium: occurs where the demand curve and supply curve intersects This gives us the market price and quantity at equilibrium Shortage (excess demand): when consumers are demanding more than producers are supplying Surplus (excess supply): when producers are producing more than consumers are demanding Rationing Functions of Prices: Rationing function of prices: ability of competitive forces of demand and supply to establish a price at which selling and buying decisions are consistent This establishes the market equilibrium, and if you are not at it, you will move towards it Efficient Allocation: Productive efficiency: Producing goods in the least costly way Using the best technology Using the right mix of resources Allocative efficiency: Producing the right mix of goods
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