Module 6-7 (supply and equilibrium) Flashcards
What is the difference between movements along the supply curve and changes in supply
the shift in the supply curve are by the determinants of supply and the movement along the supply curve is the change of P of the same good.
Quantity supply
the amount of goods or services a producer is willing to sell at some specific price
Supply schedule
how much good or service producers will supply at different prices
Supply Curve
shows the relationship b/w Qs and P, basically graphs the supply schedule
Law of Supply
the direct relationship between Price and Quantity supply
change in supply and what are the factors that cause the shift
is a shift of the S curve in which the quantity supplied changes
△ technology △ expectation of sellers △ # of suppliers (producers) △ P of related goods or services △ in input prices (resource prices)
Taxes and government subsidies
Movement along the supply curve
A change in Qs on the curve of a good because a change of the SAME good’s price
Input
Anything that is used to produce a good or service
Individual supply curve
the relationships between Qs and P for an individual producer
Equilibrium
an economic situation in which no individual would be better off doing something different
equilibrium price
When Qs = Qd also known as the market clearing price
equilibrium quantity
the quantity of the good bought and sold at the equilibrium price is called the equilibrium quantity
Why does the market price fall if it is above the equilibrium price
Because there is a surplus there for Qs > Qd and bring the prices back down will make buyers buy the supply again because it will being towards back to equilibrium
Price about its equilibrium creates a ______
surplus
Surplus
of a good is when Qs > Qd because P is above the Equilibrium point
Shortage
when Qd > Qs because P is below the equilibrium point
Why does the market price rise if it is below the Equilibrium price
Because there is high demand so sellers can jack their price back up and it will bleed off the shortage and go back to equilibrium
Price below its Equilibrium level creates a ______
shortage
How equilibrium price and quantity are affected when there is a simultaneous change in both supply and demand
depends on graph
What happens when a demand curve shifts [7]
When the demand curve shifts to the right, meaning increase in demand, that means the prices go up and Qs goes up as well.
When the demand curve shifts to the left, meaning D goes down, that means the Price goes down and the Qs goes down as well.
What happens when the supply curve shifts [7]
If the supply curve shifts to the left meaning Supply has gone down due to the determinants of supply, that means the Qs goes down, however P depends on how dramatically the supply goes down.
Now if the supply shifts to the right meaning supply goes up, then P goes down (usually) and Qs goes up
Simultaneous shifts of Supply and Demand Curves
check the graph
Factors that shift supply
Change in Input prices
If an input used to produce A rise, supply of A decreases to the left
If P of input used to produce A falls then supply of A increases (shifts right)
Change in P of related goods or services
If A and B are substitutes in production
if price of B rises then supply of A decreases
if price of B falls then supply of A increases
Change of P of related goods or services
If A and B are complements in production
If price of B rises then supply of A increases
If price of B falls then supply of A decreses
Changes in Technology
If technology used to produce A improves then supply of A increases
Changes in expectations
If price of A is expected to rise in the futures than supply of A decreases
If price of A is expected to fall in the future than supply of A increases
Change in number of producers
If number of producers for A rises then supply of A increases
If number of producers falls for A then supply for A decreases
