September 25 2013
This presentation is the property of its rightful owner.
Sponsored Links
1 / 20

September 25, 2013 PowerPoint PPT Presentation


  • 88 Views
  • Uploaded on
  • Presentation posted in: General

September 25, 2013. Review Demand Packet Notes: Supply Video Clips? Supply and Demand Curves HW: Supply Packet. Supply. Schedule or curve Amount producers are willing and able to sell at a given price Individual supply Market supply. 3- 2. LO2. Law of Supply.

Download Presentation

September 25, 2013

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript


September 25 2013

September 25, 2013

  • Review Demand Packet

  • Notes: Supply

  • Video Clips? Supply and Demand Curves

    HW: Supply Packet


Supply

Supply

  • Schedule or curve

  • Amount producers are willing and able to sell at a given price

  • Individual supply

  • Market supply

3-2

LO2


Law of supply

Law of Supply

  • Other things equal, as the price rises, the quantity supplied rises and as the price falls, the quantity supplied falls.

  • Reason:

  • Price acts as an incentive to producers

  • Costs will rise!

3-3

LO2


The supply curve

The Supply Curve

5

4

3

2

1

0

P

S

Price (per bushel)

Q

10 20 30 40 50 60 70

Quantity supplied (bushels per week)

3-4

LO2


Changes in supply

Changes in Supply

P

S3

S1

$6

5

4

3

2

1

0

Decrease

in supply

S2

Price (per bushel)

Increase

in supply

Q

2 4 6 8 10 12 14 16

Quantity supplied (thousands of bushels per week)

3-5

LO2


Changes in supply1

Changes in Supply

P

Change in Quantity Supplied

S3

S1

$6

5

4

3

2

1

0

S2

Price (per bushel)

Change in Supply

Q

2 4 6 8 10 12 14 16

Quantity supplied (thousands of bushels per week)

3-6

LO2


Determinants of supply supply shifters

Determinants of Supply“Supply Shifters”

  • What if the “All other things equal” assumption changes???

  • Cost is the #1 Factor in Supply!

  • A change in resource prices

  • A change in technology

  • A change in the number of sellers

  • A change in taxes (a cost) and subsidies (tax in reverse)

  • A change in prices of other goods

  • A change in producer expectations

3-7

LO2


Market equilibrium

Market Equilibrium

  • Equilibrium occurs where the demand curve and supply curve intersect.

  • Surplus and shortage

  • Rationing function of prices

  • Efficient allocation

    • Productive efficiency

    • Allocative efficiency

3-8

LO3


Market equilibrium1

Market Equilibrium

200 Buyers & 200 Sellers

Market

Supply

200 Sellers

Market

Demand

200 Buyers

6

5

4

3

2

1

0

6,000 Bushel

Surplus

S

P

Qd

P

Qs

2,000

4,000

7,000

11,000

16,000

$5

4

3

2

1

$5

4

3

2

1

12,000

10,000

7,000

4,000

1,000

Price (per bushel)

3

7,000 Bushel

Shortage

D

2 4 6 8 10 12 14 16 18

7

Bushels of Corn (thousands per week)

3-9

LO3


Rationing functions of prices

Rationing Functions of Prices

  • The ability of the competitive forces of demand and supply to establish a price at which selling and buying decisions are consistent.

3-10

LO3


Efficient allocation

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

    • The combination of goods most highly valued by society

3-11

LO3


Changes in demand and equilibrium

`

`

Changes in Demand and Equilibrium

Changes in Demand and Equilibrium

D increase:

P, Q

D decrease:

P, Q

P

P

S

S

D2

D3

D1

D4

0

0

Decrease in demand

Increase in demand

3-12

LO4

LO4


Changes in demand and equilibrium1

`

`

Changes in Supply and Equilibrium

Changes in Demand and Equilibrium

S increase:

P, Q

S decrease:

P, Q

P

P

S1

S4

S3

S2

D

D

0

0

Decrease in supply

Increase in supply

3-13

LO4

LO4


Complex cases

Complex Cases

3-14

LO4


Government set prices

Government Set Prices

  • Price Ceilings

    • Set below equilibrium price

    • Rationing problem

    • Black markets

  • Example: Rent control

3-15

LO5


Government set prices1

Government Set Prices

P

S

$3.50

P0

ceiling

3.00

PC

D

Shortage

Q

Qs

Q0

Qd

3-16

LO5


Government set prices2

Government Set Prices

  • Price Floors

    • Prices are set above the market price

    • Chronic surpluses

  • Example: Minimum wage laws

3-17

LO5


Government set prices3

Government Set Prices

P

S

Surplus

floor

$3.00

Pf

P0

2.00

D

Q

Qd

Q0

Qs

3-18

LO5


Legal market for human organs

Legal Market for Human Organs

  • What if we created a legal market for human organs?

  • Positive effects

    • Increase the incentive to donate

    • Eliminate the persistent shortage of eyes, livers, hearts, kidneys, etc.

3-19


Legal market for human organs1

Legal Market for Human Organs

  • Negative effects

    • Increases the cost of medical care

    • Diminishes the special nature of life by commercializing it

3-20


  • Login