Transcript Slide 1

Test Yourself
Price
Which is more important in determining
market equilibrium supply or demand? Answer – both are
Is it utility or cost of production that
important
determines value?
S
P*
D
Q* Quantity
“We might as
reasonably dispute
whether it is the upper
or lower blade of a pair
of scissors that cuts a
piece of paper, as
whether the value is
governed by utility or
cost” Alfred Marshall
1920 p. 348
Test Your Self
A
8
7
What happens if demand decrease from D1to D2?
D
What is new equilibrium point? Why?
6
Price `
5
F
What is CS before / after?
B
H
What is PS before / after?
4
G
3
What is TS before / after?
C
2
E
1
D2
0
8.5
9.5
10.5
11.5
12.5
13.5
14.5
Quantity millions of bushels
15.5
D1
Test Your Self
A
8
7
What happens if demand decrease from D1to D2?
D
What is new equilibrium point? Why?
Equilibrium points – B to C
What is CS before / after?
6
Price `
5
F
B
H
What is PS before / after?
4
G
3
What is TS before / after?
C
2
E
1
D2
0
8.5
9.5
10.5
11.5
12.5
13.5
14.5
Quantity millions of bushels
15.5
D1
Test Your Self
A
8
7
What happens if demand decreases from D1to D2?
D
What is new equilibrium point? Why?
Equilibrium points – B to C
What is CS before / after?
ABF to DCG
What is PS before / after?
6
Price `
5
F
B
H
4
G
3
What is TS before / after?
C
2
E
1
D2
0
8.5
9.5
10.5
11.5
12.5
13.5
14.5
Quantity millions of bushels
15.5
D1
Test Your Self
A
8
7
What happens if demand decrease from D1to D2?
D
What is new equilibrium point? Why?
Equilibrium points – B to C
What is CS before / after?
ABF to DCG
What is PS before / after?
EBF to ECG
What is TS before / after?
6
Price `
5
F
B
H
4
G
3
C
2
E
1
D2
0
8.5
9.5
10.5
11.5
12.5
13.5
14.5
Quantity millions of bushels
15.5
D1
Test Your Self
A
8
7
What happens if demand decreases from D1to D2?
D
What is new equilibrium point? Why?
Equilibrium points – B to C
What is CS before / after?
ABF to DCG
What is PS before / after?
EBF to ECG
What is TS before / after?
EBA to ECD
6
Price `
5
F
B
H
4
G
3
C
2
E
1
D2
0
8.5
9.5
10.5
11.5
12.5
13.5
14.5
Quantity millions of bushels
15.5
D1