ECON101 Lecture Notes - Lecture 2: Economic Equilibrium, Shortage

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Number of firms in the industry (FN)
More out is being made at each price so supply curve shifts to right (g1)
If firms leave the industry, less output will be made available at each price so
supply curve will shift to the left (decrease in supply)
Technology (T)
Technology reflects how factors of production can best be combined to produce a
product (commodity)
If there is an advancement in technology that introduces more cost effective
methods of production, firms in the industry will be in the position to supply more
units at each price (shift to the right)
Summary
A change in the price of the commodity (PC) will cause a movement along the
supply curve (change in quantity supply)
A change in the remaining variables including (CP, POC, EFP, FN, T) causes the
supply curve to shift either to right or left (change in supply)
Exceptions to the positively sloped supply curve
Backward-bending supply curve of labour: once a desired level of income is
realized, workers are willing to offer increasingly less hours of labour as wage rate
rises. Thereby allowing more time for other activities such as leisure
Example: graph 2
Wage rate / hour Quantity of hours supplied
$2 10
$3 12
$4 15
$5 12 (reached desire lvl of income)
$6 10
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