Lecture 4 Notes
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This 3 page Class Notes was uploaded by Lauren Notetaker on Sunday September 20, 2015. The Class Notes belongs to ECON 1110 at Cornell University taught by Thomas, S in Fall 2015. Since its upload, it has received 65 views. For similar materials see Introductory microeconomics in Economcs at Cornell University.
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Date Created: 09/20/15
Lecture 4 Notes 932015 Supply curve is linear and positive upward sloping o If the price goes up quantity supplied goes up o If the price goes down the quantity supplied goes down Change in quantity supplied 0 Results from a change in price 0 Assumes the availability of factors of production cost of factors of production production technology etc Ceteris Paribus Change in supply 0 Results from a in the availability of factors of production cost of factors of production production technology etc Increase in supply 0 Curve will shift down and to the right 0 We are supplying more at every price point Decrease in supply 0 Curve will shift up and to the left 0 At every price point will be supplying less Law of supply 0 There is a positive relationship between price and quantity supplied 0 As price rises quantity supplied increases 0 As price falls quantity supplied falls 0 Supply curves are positively sloped The Cost of Production 0 Firms exist to make a pro t 0 Pro t Revenue Cost 0 Revenue is the same the difference is what we include in the cost 0 Accounting Cost transport goods shipping or drivers advertising taxes 0 Economic cost opportunity cost Cost of production depends on several factors 0 Available technologies 0 Price of inputs the factors of production If the good becomes more scarce price of good rises o Quantities of inputs needed by the rm Produce more things ef ciently Can get you to work harder Pro t Maximization Assuming that the rm s objective is to maximize pro ts a rm s decision about what quantity of output to produce depends on three things 0 The price of the output goods or service if they can charge more they will produce more If they can t charge more they will supply less 0 The cost of producing the output The price of required inputs land labor capital The technologies that can be used to produce the output 0 The prices of related outputs ex Zune Microsoft s response to apples iPod They would produce fewer zooms because no one is buying them Individual vs Market Supply Market Equilibrium Equilibrium occurs when quantity demanded and quantity supplied are equal If the market is in equilibrium there is no tendency for price to change Excess Supply Surplus Excess supply occurs when the quantity supplied exceeds the quantity demanded at the current price Changes to equilibrium Assume that the widget market is in equilibrium
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