ECON 1200 1st Edition Lecture 9SUPPLY CONTINUEDChange in Quantity SuppliedChange (decrease) in Supply- Change in Quantity Supplied- Move along the supply curve. When price increases, move up and right, when price decreases, move left and down- Change in Supply- Occurs when a supply variable OTHER THAN PRICE changes o When supply increases, shift curve righto When supply decreases, shift curve left- Alternative products that a firm could produce are called substitutes in productiono Ex) when corn and soybeans are substitutes in production, and the price of corn increases, corn becomes more profitable to produce so the supply of corn increaseso When corn is more profitable, the quantity of corn supplied increases in the market for corn and shifts the entire supply curve of soybeans left (decreases)- When sellers expect the future price of a good to increase, they will wait to sell the good when the price is higher, so the supply of the good in the present will decrease- Market equilibrium- A situation in which quantity demanded= quantity suppliedo Occurs at the intersection between the demand and supply curves for a product- Demand and supply together determine the equilibrium price (P*) and equilibrium quantity (Q*)of each good and service in a market economy- If a market is out of equilibrium, then price will adjust to bring the market back to equilibriumSURPLUS: (Q supplied> Q demanded) SHORTAGE: (Q supplied< Q demanded)- A shortage gives firms the opportunity to raise prices without decreasing their sales- A surplus forces firms to lower their prices to return to market
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