ECON 104 Lecture Notes - Lecture 4: Ceteris Paribus, Economic Equilibrium
SUPPLY
• The QUANTITY SUPPLIED of a good or service is the amount that sellers will seek to sell in a
given time period.
1. Quantity Supplied Depends On:
a) PRICE OF THE GOOD. THE RELATIONSHIP BETWEEN PRICE AND QS IS SPECIAL, AND IS CALLED
SUPPLY:
• LAW OF SUPPLY: As the price of a good rises, ceteris paribus, so will the QS of that same good.
Ex: Supply Curve and Schedule
Note: A change in price (ceteris paribus) causes a movement along the supply curve.
b) INPUT PRICES used to produce the good ( )
c) TECHNOLOGY (+)
d) EXPECTATIONS
• Future Prices ( )
e) NUMBER OF SUPPLIERS
2. Shifts in the Supply Curve
• A SUPPLY CURVE shows the change in the quantity supplied of a good when its price changes,
holding constant all other determinants of supply.
When any other determinant changes, the curve shifts.
Supply and Demand Together
1. EQUILIBRIUM: A market condition in which QS = QD.
• The balancing role of Price: EQUILIBRIUM PRICE
• EQUILIBRIUM QUANTITY = QS = QD
2. REACHING EQUILIBRIUM
• “URPLU“: Ecess “uppl: Price is too high.
• “HORTAGE: Ecess Dead: Price is too low.
• LAW OF SUPPLY AND DEMAND: Price adjusts automatically to reach market equilibrium.
3. Shifts of Curves vs Movements Along Existing Curves
4. Shifting Supply and Demand: Three analytical steps.
1) Which curve(s) shift? (S or D)
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Document Summary
The quantity supplied of a good or service is the amount that sellers will seek to sell in a. The relationship between price and qs is special, and is called. Law of supply: as the price of a good rises, ceteris paribus, so will the qs of that same good. Note: a change in price (ceteris paribus) causes a movement along the supply curve. Input prices used to produce the good ( ) Shifts in the supply curve holding constant all other determinants of supply. A supply curve shows the change in the quantity supplied of a good when its price changes, When any other determinant changes, the curve shifts. Equilibrium: a market condition in which qs = qd. Urplu : e(cid:454)cess uppl(cid:455): price is (cid:862)too high. (cid:863) Hortage: e(cid:454)cess de(cid:373)a(cid:374)d: price is (cid:862)too low. (cid:863) Law of supply and demand: price adjusts automatically to reach market equilibrium. Shifts of curves vs movements along existing curves.