Cost of production for each unit (not total)
Minimum willingness to accept
Maximum willingness and ability to pay (also per unit)
Value of each unit
Marginal: unit by unit
Why does this market converge to an equilibrium price and quantity?
Why stay at one price?
3 people selling fish
2 @ $10, 1 @ $11
Identical fish and sellers
You’ll buy for $10
Won’t get a profit trying to sell for more or less
Problem: excess supply “surplus”
More quantity supplied than quantity demanded
Prices tend to be driven downward
Excess demand “shortage”
Starts at an unreasonably low price
This tends to drive prices upwards until quantity supplied = quantity demanded Situation: Price of tortillas goes up. What will happenQto E aPd E ?
EPgoes up, E Qoes down
Situation: Study shows that burritos are not healthy
EPgoes down, E gQes down
Growing corn: unexpectedly good weather
Higher EQ, lower EP
What if the price of tortillas goes up and negative burrito study is published?
EQdoes not stay the same (although it may appear to)
Consistently when demand goes down a