Professional Documents
Culture Documents
Supply
Supply
Quantity supplied is the amount of a good that sellers are
between its market price and the amount of that commodity that
producers are willing to produce and sell, other things held
constant
Price
Quantity Demanded
18
16
12
Quantity
Shifts in Supply
When changes in factors other than a goods own price affect the
SS2
Quantity
P*
DD
Q*
Quantity
Equilibrium
Surplus
When price > equilibrium price, then quantity supplied >
quantity demanded.
There is excess supply or a surplus.
Suppliers will lower the price to increase sales, thereby moving toward
equilibrium.
Excess Supply
Price
SS
DD
Qd
Qs
Quantity
Equilibrium
Shortage
When price < equilibrium price, then quantity demanded >
Equilibrium
Law of supply and demand
The claim that the price of any good adjusts to bring the
quantity supplied and the quantity demanded for that good into
balance.
Increase in Demand
Shift in DD outwards
Price
SS
P**
P*
E2
E1
DD2
DD1
Q* Q**
Q1
Quantity
Increase in Supply
Shift in SS outwards
Price
SS1
P*
SS2
E1
E2
P**
DD
Q* Q**
Q1
Quantity