Module Supply and Demand: Supply and Equilibrium KRUGMAN'S MACROECONOMICS for AP* 6 Margaret Ray and David Anderson.

ModuleSupply and Demand:Supply and Equilibrium

KRUGMAN'SMACROECONOMICS for AP*

6

Margaret Ray and David Anderson

What you will learnWhat you will learn

in thisin this ModuleModule::• 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 The Supply Schedule and the Supply CurveSupply Curve

• Supply schedule

• Quantity supplied

• Supply Curve

• Law of supply

Supply Schedule and Supply Schedule and Supply CurveSupply Curve

Price Quantity

$ 8 22

$ 7 14

$ 6 8

$ 5 6

$ 4 5

$ 3 4

$ 2 3

QuantityQuantity

PricePrice

Understanding Shifts of the Understanding Shifts of the Supply CurveSupply 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

• Equilibrium

• Equilibrium price

• Equilibrium quantity

• Market-clearing price

Supply, Demand, and EquilibriumSupply, Demand, and Equilibrium

Finding the Equilibrium Price Finding the Equilibrium Price and Quantityand Quantity

equilibriumEequilibriumprice

equilibriumquantity

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

• Surplus

• Producer's Incentive

Why Does the Market Price Rise If It Why Does the Market Price Rise If It is Below the Equilibrium Price?is Below the Equilibrium Price?

• Shortage

• Consumer's Incentive

• The tendency towards equilibrium

Figure 6.1 The Supply Schedule and the Supply CurveRay and Anderson: Krugman’s Economics for AP, First Edition

Copyright © 2011 by Worth Publishers

Figure 6.2 An Increase in SupplyRay and Anderson: Krugman’s Economics for AP, First Edition


Figure 6.3 Movement Along the Supply Curve Versus Shift of the Supply Curve

Ray and Anderson: Krugman’s Economics for AP, First EditionCopyright © 2011 by Worth Publishers

Figure 6.4 Shifts of the Supply CurveRay and Anderson: Krugman’s Economics for AP, First Edition


Figure 6.5 The Individual Supply Curve and the Market Supply Curve

Ray and Anderson: Krugman’s Economics for AP, First Edition


Table 6.1 Factors That Shift SupplyRay and Anderson: Krugman’s Economics for AP, First Edition


Figure 6.6 Market EquilibriumRay and Anderson: Krugman’s Economics for AP, First Edition


Figure 6.7 Price Above Its Equilibrium Level Creates a Surplus


Figure 6.8 Price Below Its Equilibrium Level Creates a Shortage


Module Supply and Demand: Supply and Equilibrium KRUGMAN'S MACROECONOMICS for AP* 6 Margaret Ray and David Anderson.

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