Download Module 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
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
• 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