Econ 201 1st Edition Lecture 6Outline of Last Lecture I. Competitive MarketII. Demand CurveIII. Supply CurveIV. Movements and Shifts Along a CurveOutline of Current LectureI. EquilibriumII. Excess Supply and DemandIII. Shifting of CurvesIV. Simultaneous Curve ShiftsCurrent LectureSupply and DemandEquilibrium-Equilibrium occurs on a graph of the supply and demand curve where the intersect (point E).-Y axis: price-X axis: quantity-Supply curve – increases from left to right-Demand curve – decreases from left to rightExcess Supply-There is a surplus of a good when the quantity supplied exceeds the quantity demanded.-Surpluses occur when the price is above its equilibrium level.-Surpluses do not last: sellers will reduce price so they can move goods off the shelves.Excess Demand-There is a shortage when the quantity demanded exceeds the quantity supplied.-Shortages occur when the price is below its equilibrium level.-Shortages do not last: sellers will increase price to increase revenue.Question-At $5, quantity supplied is 13, and quantity demanded is 6, leading to a _______.Answer: surplus of 7 unitsDemand Curve Shifts-An increase in demand leads to a movement along the supply curve due to a higher equilibrium price and higher equilibrium quantity.Supply Curve ShiftsThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.-A decrease in supply leads to a movement along the demand curve due to a higher equilibrium price and lower equilibrium quantity.One Curve Shifts-An input used to grow coffee beans increases in price. What will be the effect in the market for coffee beans?Answer: The supply of coffee decreases and there is an excess demand.-The recent scientific studies show that coffee increases the incidence of cancer. What will be the effect in the market for coffee?Answer: the demand for coffee decreases, and there is excess supply. - Suppliers of smokes expect the price to increase in about a month time and a new successful ad campaign persuades more consumers to purchase smokes. What will be the effect in the market of Smokes?Answer: the price increasesTwo Curve Shifts-Suppliers of smokes expect the price to increase in about a month time and a new successful ad campaign persuades more consumers to purchase smokes. What will be the effect in the market of Smokes?Answer: The supply curve shifts left and the demand curve shifts right-if the price and quantity move together, it was a demand change.-If they move in opposite directions, it was a supply change.Simultaneous Shifts of Supply and Demand-Two opposing forces determining the equilibrium quantity:- The increase in demand dominates the decrease in supply.- The decrease in supply dominates the increase in demand.Competitive Markets-When markets are not, things get a little more complicated.Example: Large sellers will have to predict how their production, marketing, and pricing decisions will affect the entire market (and their own