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SUPPLY AND DEMAND D. SUPPLY 1) Definition of supply 2) Law of supply 3) DIRECT RELATIONSHIP...

SUPPLY AND DEMAND

D. SUPPLY

1) Definition of supply

2) Law of supply

3) DIRECT RELATIONSHIP BETWEEN PRICE AND QUANTITY SUPPLIED

4) REASON THE SUPPLY CURVE SLOPES UPWARD TO THE RIGHT

5) MOVEMENT ALONG THE CURVE

6) SHIFTS IN THE CURVE

E. Illustration OF A MARKET

1) Equilibrium condition

2) Disequilibrium conditions

(a) Surplus

(b) Shortage

(c) Consumer surplus

(d) Producer surplus

F. SIMULTANEOUS CHANGES IN SUPPLY AND DEMAND

1) DEMAND IS MORE POWER THAN SUPPLY WHEN THEY BOTH INCREASE

2) DEMAND IS LESS POWERFUL THAN SUPPLY WHEN THEY BOTH INCREASE

3) DEMAND AND SUPPLY INCREASE AT THE SAME TIME

4) DEMAND AND SUPPLY DECREASE AT THE SAME TIME

5) SIMULTANEOUS INCREASE IN DEMAND AND SUPPLY

6) SIMULTANEOUS DECREASE IN SUPPLY AND DEMAND

G. SOLVING FOR EQUILIBRIUM PRICE AND QUANTITY

1) The standard demand and supply functions

(1) Calculating equilibrium price and quantity

(2) Illustration of equilibrium price and quantity

2) The inverse demand and supply functions

(1) Calculating equilibrium price and quantity

(2) Illustration of equilibrium price and quantity

H. PRICE CONTROLS

1) Definition of price controls

2) Price ceiling(disequilibrium)

3) Price floor(disequilibrium)

I. MARKET FAILURE

A. Market failure defined

1. Externalities

2. Public Goods

Solutions

Expert Solution

D) Supply

Detinition of Supply

Supply is defined as the amount of a product that would be offered for sale at all possible prices that could prevail in the market. It is what will be produced and is from the perspective of the producer.

Law of Supply

Law of Supply is the principle that suppliers will normally offer more for sale at high prices and less at lower prices. As at higher price by supplying more producers can earn more profit as compared when prices are low.

Direct relation between Price and Quantity Supplied

The price of the product and the quantity supplied of that product are related positively. The higher the product's price, the more its producers will supply; the lower the price, the less its producers will supply. Example As the price of chocolates increase producers will be more willing to supply the chocolate at Increased price.

Reason of Supply Curve sloping upward towards right.

The supply curve is upward sloping because it reflects the higher price needed to cover the higher marginal cost of production. The supply curve is drawn as a slope rising upward from left to right, since product price and quantity supplied are directly related i.e., as the price of a commodity increases in the market, the amount supplied increases.

Movement along the Supply Curve

Movement along the supply curve occurs when a change in the quantity supplied of a good is brought along by a change in its price.

If the prices increase, other factors kept constant, there is an increase in the quantity supplied which is referred to as an expansion in supply. This is represented as an upward movement along the same supply curve.

Conversely, if the prices decrease, keeping other factors constant, firms tend to decrease the supply. This is referred to as a contraction in supply. This is represented as a downward movement along the same supply curve.

Shift in the Supply Curve

A change in supply leads to a shift in the supply curve, which causes an imbalance in the market that is corrected by changing prices and demand. An increase in the change in supply shifts the supply curve to the right, while a decrease in the change in supply shifts the supply curve left. A shift in supply curve occurs when supply changes due to change in non price factors.These include the number of sellers in a market, the level of technology used in a good's production, the prices of inputs used to produce a good, the amount of government regulation.


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