ECON 2105 1nd Edition Lecture 3 Outline of Last Lecture (module 6) I. Supply Curve II. Movement vs Shift III. Supply ShocksIV. Scenarios Outline of Current Lecture (module 7) I. Changes in EquilibriumII. Demand Shocks III. Supply Shocks IV. Practice Current LectureI. Changes in Equilibrium- When Qs=Qd at a certain price = market equilibrium (no pressure on prices) - Amount consumers would buy at a price is the same as the amount producers wish to sell Identify the shock?- Oil higher prices with lower quantity Law of Supply – when Price goes up so does quantity supplied - If equilibrium quantity increases, then it is positive shock - If equilibrium quantity decreases, then it is a negative shock II. Demand Shock- Positive demand shock increases market prices and sales These 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.- Negative demand shock decreases market prices and sales Positive demand shock- there will be a shortage for some time, Price goes up quantity goes up positive demand shock III. Supply Shock - A positive supply shock will decrease market price and will increase sales (good) - A negative supply shock will increase (raise) market prices and will decrease sales - Positive supply shock caused by better technology, government buys subsidies - Negative supply shock hurricane, oil spill - Negative supply shock- upward pressure on prices, excess demand, prices go up and quantity goes downIf Prices go up and quantity goes up demand shock If prices go down quantity goes down demand shock If prices go up and quantity goes down supply shock If prices go down and quantity goes up supply shock It is possible to have two shocks at the same time Supply shock dominates demand shock Simultaneous Shifts of Supply and DemandSupply IncreasesSupply DecreasesDemand IncreasesPrice: ambiguousQuantity: upPrice: upQuantity: ambiguousDemand DecreasesPrice: downQuantity: ambiguousPrice: ambiguousQuantity: downIV. Practice What would happen to supply of sneakers if companies had to hire more expensive labor instead of cheap labor? Input prices will go up quantity sold will go down resulting in a negative supply
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