Lecture 4 - Shifts in Demand and Supply Curves Flashcards
What does the demand curve show?
Shows the quantity demanded at various prices.
What does the supply curve show?
Shows the quantity supplied at various prices.
Shift of the Supply Curve
An increase in supply means a _____ward shift of the supply curve.
i.e. at a given price, the supply is willing to supply ____.
An increase in supply means a RIGHTward shift of the supply curve.
i.e. at a given price, the supply is willing to supply MORE.
Shift of the Supply Curve
An ________ in supply means a ____ward shift of the supply curve.
i.e. at a given price, the supply is willing to supply less.
An DECREASE in supply means a LEFTward shift of the supply curve.
i.e. at a given price, the supply is willing to supply less.
What happens when the supply curve shifts?
A decrease in supply leads to a movement along the ______ curve due to a ______ equilibrium price and _____ equilibrium quantity.
A decrease in supply leads to a movement along the DEMAND curve due to a HIGHER equilibrium price and HIGHER equilibrium quantity.
What happens when the supply curve shifts?
A increase in supply leads to a movement along the ______ curve due to a ______ equilibrium price and _____ equilibrium quantity.
What happens when the supply curve shifts?
A increase in supply leads to a movement along the DEMAND curve due to a LOWER equilibrium price and LOWER equilibrium quantity.
What could cause supply curve to shift?
Hint: 7 things
- Input prices
- The prices of related goods or services
- Technology
- Expectations
- Barriers to entry by government - cost of licenses, time consuming/inconvenient red tapes
- The number of producers
- Tax and Subsidy
What happens when the supply curve shifts?
Changes in Input Prices
Input price affects the ____ of __________.
A decrease in the price of an input (all else equal) ________ profits and encourages ____ ______.
Input price affects the COST of PRODUCTION.
A decrease in the price of an input (all else equal) INCREASES profits and encourages MORE SUPPLY.
What happens when the supply curve shifts?
Changes in Input Prices
A _________ in the price of an input (all else equal) decreases profits and encourages less supply.
A INCREASE in the price of an input (all else equal) decreases profits and encourages less supply.
What happens when the supply curve shifts?
Changes in Technology
New, better technology makes sellers willy to offer ____ at a given price or sell their quantity at a _____ price.
A technological innovation ______ _____ and _________ supply.
New, better technology makes sellers willing to offer MORE at a given price or sell their quantity at a LOWER price.
A technological innovation LOWER COSTS and INCREASES supply.
What happens when the supply curve shifts?
Changes in Expectations
The expectation of suppliers of a higher price for a good in the future decreases current supply of the good.
Sellers will ______ their current offerings in anticipation of the _________ of ______ ______ in order the highest possible price.
The expectation of suppliers of a higher price for a good in the future decreases current supply of the good.
Sellers will ADJUST their current offerings in anticipation of the DIRECTION of FUTURE PRICES in order the highest possible price.
What happens when the supply curve shifts?
Changes in Number of Producers
As producers enter and exit the market, the overall ______ changes.
Entry implies ____ sellers in the market, __________ supply.
Exit implies _____ sellers in the market, __________ supply.
As producers enter and exit the market, the overall SUPPLY changes.
Entry implies MORE sellers in the market, INCREASING supply.
Exit implies FEWER sellers in the market, DECREASING supply.
What happens when the supply curve shifts?
Changes in Tax and Subsidy
Increase in Tax on good supplied will ______ the ______ on each good.
So, the quantity that a supplier is willing to ______ at a given price _______ —> _________ in supply.
Increase in Tax on good supplied will REDUCE the PROFIT on each good.
So, the quantity that a supplier is willing to SUPPLY at a given price REDUCES resulting in a DECREASE in supply.
What happens when the supply curve shifts?
Changes in Tax and Subsidy
Decrease in Tax on good supplied will ______ the ______ on each good.
So, the quantity that a supplier is willing to ______ at a given price _______ —> _________ in supply.
DECREASE in Tax on good supplied will INCREASE the PROFIT on each good.
So, the quantity that a supplier is willing to SUPPLY at a given price INCREASES resulting in a INCREASE in supply.
