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Module 6. Supply and Equilibrium

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17 views18 pages

Module 6. Supply and Equilibrium

Uploaded by

Aisha Azam
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPT, PDF, TXT or read online on Scribd
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Module 6

Supply and Demand:


Supply and Equilibrium
KRUGMAN'S
MACROECONOMICS for AP*
Margaret Ray and David Anderson
What you will learn
in this Module:
• What the supply curve is

• The difference between movements


along the supply curve and changes
in supply

• The factors that shift the supply


curve

• How supply and demand curves


determine a market's equilibrium
price and equilibrium quantity

• In the case of a shortage or surplus,


how price moves the market back to
equilibrium
The Supply Schedule and
the Supply Curve

• Supply schedule
• Quantity supplied
• Supply Curve
• Law of supply
Supply Schedule and
Supply Curve
Price Quantity
Price
$8 22
$7 14
$6 8
$5 6
$4 5
$3 4
$2 3

Quantity
Understanding Shifts of
the Supply Curve
• Increase = right, decrease = left

• T.R.I.C.E. shifts supply

• Technology

• Related prices (complements in


production, substitutes in production)

• Input prices

• Competition (number of producers)

• Expectations
Supply, Demand,
and Equilibrium
• Equilibrium
• Equilibrium price
• Equilibrium
quantity
• Market-clearing
price
Finding the Equilibrium
Price and Quantity

equilibrium
price E equilibrium

equilibrium
quantity
Why Does the Market Price
Fall If It Is Above the
Equilibrium Price?

• Surplus

• Producer's
Incentive
Why Does the Market Price
Rise If It is Below the
Equilibrium Price?

• Shortage

• Consumer's
Incentive

• The tendency
towards
equilibrium
Figure 6.1 The Supply Schedule and the Supply Curve
Ray and Anderson: Krugman’s Economics for AP, First Edition
Copyright © 2011 by Worth Publishers
Figure 6.2 An Increase in Supply
Ray and Anderson: Krugman’s Economics for AP, First Edition
Copyright © 2011 by Worth Publishers
Figure 6.3 Movement Along the Supply Curve Versus Shift of the Supply Curve
Ray and Anderson: Krugman’s Economics for AP, First Edition
Copyright © 2011 by Worth Publishers
Figure 6.4 Shifts of the Supply Curve
Ray and Anderson: Krugman’s Economics for AP, First Edition
Copyright © 2011 by Worth Publishers
Figure 6.5 The Individual Supply Curve and the Market Supply
Curve
Ray and Anderson: Krugman’s Economics for AP, First Edition
Copyright © 2011 by Worth Publishers
Table 6.1 Factors That Shift Supply
Ray and Anderson: Krugman’s Economics for AP, First Edition
Copyright © 2011 by Worth Publishers
Figure 6.6 Market Equilibrium
Ray and Anderson: Krugman’s Economics for AP, First Edition
Copyright © 2011 by Worth Publishers
Figure 6.7 Price Above Its Equilibrium Level Creates a Surplus
Ray and Anderson: Krugman’s Economics for AP, First Edition
Copyright © 2011 by Worth Publishers
Figure 6.8 Price Below Its Equilibrium Level Creates a Shortage
Ray and Anderson: Krugman’s Economics for AP, First Edition
Copyright © 2011 by Worth Publishers

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