1 Fig. 1 The Demand Curve Number of Bottles per Month Price per Bottle A B $4.00 2.00 D 40,00060,000...
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3 Fig. 3(a) Movements Along and Shifts of the Demand Curve Quantity Price P2P2 Q2Q2 Q1Q1 Q3Q3 P1P1 P3P3 Price increase moves us leftward along demand curve Price increase moves us rightward along demand curve
Transcript of 1 Fig. 1 The Demand Curve Number of Bottles per Month Price per Bottle A B $4.00 2.00 D 40,00060,000...
1
Fig. 1 The Demand Curve
Number of Bottles per Month
Price per Bottle
A
B
$4.00
2.00
D
40,000 60,000
At $2.00 per bottle, 60,000 bottles are demanded (point B).
When the price is $4.00 per bottle, 40,000 bottles are demanded (point A).
2
Fig. 2 A Shift of the Demand Curve
B C$2.00
D1D2
60,000 80,000
An increase in income shifts the demand curve for maple syrup from D1 to D2. At each price, more bottles are demanded after the shift.
Number of Bottles per Month
Price per Bottle
3
Fig. 3(a) Movements Along and Shifts of the Demand Curve
Quantity
Price
P2
Q2 Q1 Q3
P1
P3
Price increase moves us leftward along demand curve
Price increase moves us rightward along demand curve
4
Fig. 3(b) Movements Along and Shifts of the Demand Curve
Quantity
Price
D2
D1
Entire demand curve shifts rightward when:• income or wealth ↑• price of substitute ↑• price of complement ↓• population ↑• expected price ↑• tastes shift toward good
5
Fig. 3(c) Movements Along and Shifts of the Demand Curve
Quantity
Price
D1
D2
Entire demand curve shifts leftward when:• income or wealth ↓• price of substitute ↓• price of complement ↑• population ↓• expected price ↓• tastes shift toward good
6
Fig. 4 The Supply Curve
F
G
2.00
S
40,000 60,000
$4.00
At $4.00 per bottle, quantity supplied is 60,000 bottles (point G).
When the price is $2.00 per bottle, 40,000 bottles are supplied (point F).
Number of Bottles per Month
Price per Bottle
7
Fig. 5 A Shift of the Supply Curve
S2
G J
S1
60,000
$4.00
80,000
A decrease in transportation costs shifts the supply curve for maple syrup from S1 to S2.
Number of Bottles per Month
Price per Bottle
At each price, more bottles are supplied after the shift
8
Fig. 6(a) Changes in Supply and in Quantity Supplied
P2
Q3 Q1 Q2
P1
P3
Quantity
Price Price increase moves us rightward along supply curve
S
Price increase moves us leftward along supply curve
9
Fig. 6(b) Changes in Supply and in Quantity Supplied
Quantity
Price
S2
S1Entire supply curve shifts rightward when:• price of input ↓• price of alternate good ↓• number of firms ↑• expected price ↑• technological advance• favorable weather
10
Fig. 6(c) Changes in Supply and in Quantity Supplied
Quantity
Price
S1
S2Entire supply curve shifts rightward when:• price of input ↑• price of alternate good ↑• number of firms ↓• expected price ↑• unfavorable weather
11
Fig. 7 Market Equilibrium
E
H J1.00
$3.00
D
S
50,000 75,00025,000
Excess Demand
4. until price reaches its equilibrium value of $3.00
.
2. causes the price to rise . . .
3. shrinking the excess demand . . .
1. At a price of $1.00 per bottle an excess demand of 50,000 bottles . . .
Number of Bottles per Month
Price per Bottle
12
Fig. 8 Excess Supply and Price Adjustment
3. shrinking the excess supply . . .
K L
E3.00
D
S
$5.00
50,00035,000 65,000
Excess Supply at $5.00
2. causes the price to drop,
4. until price reaches its equilibrium value of $3.00.
Number of Bottles per Month
Price per Bottle
1. At a price of $5.00 per bottle an excess supply of 30,000 bottles . . .
13
Fig. 9 A Shift in Demand and a New Equilibrium
1. An increase in demand . . .E
F'
3.00
D1
D2
S
$4.00
50,000 60,000
3. to a new equilibrium.
5. and equilibrium quantity increases too.
2. moves us along the supply curve . . .
Number of Bottles of Maple Syrup per Period
Price per Bottle
4. Equilibrium price increases
14
Fig. 10 A Shift of Supply and a New Equilibrium
E'
E3.00
D
$5.00
50,00035,000
S2 S1
Number of Bottles
Price per Bottle
15
Fig. 11 Changes in the Market for Handheld PCs
1. An increase in supply . . .
2. and a decrease in demand . . .
5. and quantity decreased as well.
A
B$400
D2003
S2002
S2003
D2002
$500
2.45 3.33 Millions of Handheld PCs per Quarter
Price per Handheld
PC
4. Price decreased . . .
3. moved the market to a new equilibrium.
16
Fig. 12 A Price Ceiling in the Market for Maple Syrup
60,00050,00040,000
TE
VR
D
S
$4.00
3.00
2.002. increases quantity
demanded
3. and decreases quantity supplied.
4. The result is a shortage – the distance between R and V.
Number of Bottles of Maple Syrup per Period
Price per Bottle
1. A price ceiling lower than the equilibrium price . . .
5. With a black market, the lower quantity sells for a higher price than initially.
17
Fig. 13 The Market for Oil
P2
D
E'
P1E
Q2 Q1
S2
S1
Barrels of Oil
Price per Barrel of Oil
18
Fig. 14 The Market for Natural Gas
Cubic Feet of Natural Gas
Price per Cubic Foot of Natural
Gas
P4
P3
F
Q3 Q4
S
D2
F'
D1
