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6
5 states that there is a
4
positive relationship
3
2
between price and
1 quantity of a good
0 supplied.
0 10 20 30 40 50
Thousands of bushels of soybeans This means that
produced per year
supply curves
typically have a
positive slope.
Supply Schedule for Coffee Beans
A supply schedule
Quantity of
shows how much of Price of coffee beans
a good or service coffee beans supplied
would be supplied (per pound) (billions of
pounds)
at different prices. $2.00 11.6
1.75 11.5
1.50 11.2
1.25 10.7
1.00 10.0
0.75 9.1
0.50 8.0
Price of coffee
beans (per pound) A supply curve shows
graphically how much of a
Supply
good or service people are
curve, S willing to sell at any given
$2.00 price.
1.75
As price rises, the
quantity supplied rises.
1.50
1.25
1.00
0.75
0.50
0 7 9 11 13 15 17
Quantity of coffee beans (billions of pounds)
What Causes a Supply Curve to Shift?
1.25
1.00
0 7 9 11 13 15 17
Change in supply
(Shift of curve).
Equilibrium in a competitive market: when the quantity
demanded of a good equals the quantity supplied of
that good.
The price at which this takes place is the equilibrium
price (a.k.a. market-clearing price):
The quantity of the good bought and sold at that price is the
equilibrium quantity.
Only in equilibrium
is quantity supplied
equal to quantity
demanded.
• At any price level
other than P0, the
wishes of buyers
and sellers do not
coincide.
Price of coffee
beans (per pound)
There is a surplus of a
Supply good when the quantity
$2.00
supplied exceeds the
1.75
Surplus quantity demanded.
1.50 Surpluses occur when
1.25 the price is above its
E
equilibrium level.
1.00
0.75
0.50 Demand
0 7 8.1 10 11.2 13 15 17
Quantity of coffee beans
(billions of pounds)
Quantity Quantity
demanded supplied
Price of
coffee beans There is a shortage of a
(per pound)
good when the quantity
Supply
$2.00 demanded exceeds the
1.75 quantity supplied.
1.50
Shortages occur when
the price is below its
1.25
equilibrium level.
1.00 E
0.75
Shortage
0.50 Demand
0 7 9.1 10 11.5 13 15 17
Quantity of coffee beans
(billions of pounds)
Quantity Quantity
supplied demanded
Price of
coffee beans Market equilibrium
(per pound)
Supply
occurs at point E,
$2.00
where the supply
1.75 curve and the demand
1.50 curve intersect.
1.25
0.50 Demand
0 7 10 13 15 17