Module 6 Supply and Demand Supply and Equilibrium

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

What you will learn in this Module: • 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 Supply Curve • Supply schedule • Quantity supplied • Supply Curve • Law of supply

Supply Schedule and Supply Curve Price Quantity $8 22 $7 14 $6 8 $5 6 $4 5 $3 4 $2 3

Understanding Shifts of the Supply 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

Supply, Demand, and Equilibrium • Equilibrium price • Equilibrium quantity • Market-clearing price

Finding the Equilibrium Price and Quantity equilibrium price E equilibrium quantity equilibrium

Why Does the Market Price Fall If It Is Above the Equilibrium Price? • Surplus • Producer's Incentive

Why Does the Market Price Rise If It is Below the Equilibrium Price? • Shortage • Consumer's Incentive • The tendency towards equilibrium