MGEA02H3 Study Guide - Economic Surplus, Swordfish, Deadweight Loss
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MGEA02H3 Full Course Notes
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Demand, supply and equilibrium: movement and shift of supply/demand curve. When price change, the quantity supplied/consumed will change, thus there will be a movement along the supply/demand curve. Demand is usually downward sloping and supply upward sloping. Intersection of demand and supply curves is the equilibrium point. Change in quantity demanded/quantity supplied are movements along the demand/supply curve and change in the demand/supply is a shift of the demand/supply curve. The demand/supply curve is the sum of individual demand/supply of the product. Factors that shift demand: taxes/subsidies, change in prices of related goods (substitutes/complementary goods, change in income, change in preferences. Factors that shift supply: prices of inputs (as prices rise, supply falls, number of firms (as firms rise, supply rises, technology (a new breakthrough increases supply, taxes/subsidies. Figure out the factor that changed in the situation. Shift the demand/supply curve to the relevant direction.