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Questions and Answers
A technological advancement that reduces the production cost for a good will most likely cause which of the following?
A technological advancement that reduces the production cost for a good will most likely cause which of the following?
- A movement along the existing supply curve to a higher price point.
- A leftward shift of the supply curve, indicating decreased supply at all price points.
- No change to the existing supply curve, but a change in the quantity supplied at the current price.
- A rightward shift of the supply curve, indicating a greater quantity supplied at all price points. (correct)
If market supply is derived from 200 identical firms, each with a supply function of $Q_s = 15P - 9$, what is the market supply equation?
If market supply is derived from 200 identical firms, each with a supply function of $Q_s = 15P - 9$, what is the market supply equation?
- $Q_m = 3000P - 9$
- $Q_m = 15P - 9$
- $Q_m = 3000P - 1800$ (correct)
- $Q_m = 200P - 1800$
Which of the following best describes the effect of an increase in demand on the market equilibrium, assuming that supply remains constant?
Which of the following best describes the effect of an increase in demand on the market equilibrium, assuming that supply remains constant?
- An increase in equilibrium price and a decrease in equilibrium quantity.
- A decrease in both equilibrium price and quantity.
- An increase in both equilibrium price and quantity. (correct)
- A decrease in equilibrium price and an increase in equilibrium quantity.
Which of the following scenarios would lead to a movement along the supply curve, rather than a shift of it?
Which of the following scenarios would lead to a movement along the supply curve, rather than a shift of it?
What does a point above the equilibrium price on a typical supply and demand graph indicate?
What does a point above the equilibrium price on a typical supply and demand graph indicate?
Which of the following is an example of a factor that would shift the entire supply curve?
Which of the following is an example of a factor that would shift the entire supply curve?
The market supply curve is determined when each of the individual supply curves is summed:
The market supply curve is determined when each of the individual supply curves is summed:
Which of the following statements is true regarding the supply curve?
Which of the following statements is true regarding the supply curve?
What would be the most likely effect when the market price is below the equilibrium price?
What would be the most likely effect when the market price is below the equilibrium price?
What does the supply function $Q_s = a + bP$ represent?
What does the supply function $Q_s = a + bP$ represent?
Flashcards
Supply
Supply
The amount of a product available at various prices over time.
Supply Function
Supply Function
Describes the relationship between quantity supplied and its determinants, usually price.
Supply Schedule
Supply Schedule
A table showing quantity supplied at various prices.
Supply Curve
Supply Curve
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Changes in Quantity Supplied
Changes in Quantity Supplied
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Changes in Supply
Changes in Supply
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Market Supply Curve
Market Supply Curve
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Market Equilibrium
Market Equilibrium
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Disequilibrium
Disequilibrium
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Influences on Equilibrium
Influences on Equilibrium
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Study Notes
Supply Theory
- Supply represents the amount of a product producers are willing and able to offer at different price points.
- The supply function showcases the relationship between quantity supplied and factors influencing it, often expressed as ( Q_s = a + bP ).
- The supply schedule and curve display the positive correlation between price and quantity supplied graphically and numerically.
- The supply curve's slope reflects the direct positive relationship between price and quantity supplied.
- A change in quantity supplied is a movement along the supply curve in response to price changes.
- A shift in supply is a change in the entire supply curve, triggered by factors outside price (e.g., production costs, technology, policies).
Factors Affecting Supply
- Production costs impact supply.
- Technological advancements influence supply.
- External factors (natural disasters) impact supply.
- Government policies (taxes or subsidies) affect supply.
- Transportation infrastructure impacts supply.
- Prices of related goods impact supply.
Market Supply Curve
- The market supply curve is the horizontal summation of all individual supply curves.
- A market with 120 identical sellers, each with a supply function of ( Q_s = 20P - 5 ), will have a market supply equation of ( Q_m = 2400P - 600 ).
Market Equilibrium
- Market equilibrium occurs when quantity demanded equals quantity supplied, determining equilibrium price and quantity.
- Disequilibrium happens when quantity demanded differs from quantity supplied, leading to surpluses (excess supply) or shortages (excess demand), resulting in price adjustments towards equilibrium.
- Shifts in demand or supply curves alter the equilibrium price and quantity.
- Increased demand raises both equilibrium price and quantity.
- Increased supply lowers equilibrium price but raises equilibrium quantity.
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