Transcript Price per lb

Price per lb.
Salmon
Market
S
At a price of $5.50,
consumers can buy
all they wish to buy.
Sellers may sell all
they wish at
that price as well.

$5.50
D
0
800
Quantity (lbs)
Effect of a change in demand
Demand could shift
right due to
Increase in the
price of red snapper,
orange roughy, etc.
Price per lb.
Salmon
Market
$6.50
$5.50
S
1
Increase in
consumer incomes.
2
 Change of
preferences
D1
0
800 920
D2
Quantity (lbs)
Effect of a change in demand, part 2
Demand could shift
left due to
Decrease in the
price of red snapper,
orange roughy, etc.
Price per lb.
Salmon
Market
$6.50
$5.50
S
1
Decrease in
consumer incomes.
2
 Change of
preferences
D1
0
800 920
D2
Quantity (lbs)
Effect of a change in supply
Price per lb.
Salmon
Market
$5.50
$4.50
S1
1
S2
Decrease in input
prices (fuel, bait,
wages,
transportation, etc.)
2
D1
0
800 1000
Supply could shift
right due to
Increase in the
number of
(fisherman) sellers.
 Better fishing
Quantity (lbs)
Effect of a change in supply, part 2
Price per lb.
Salmon
Market
$6.25
$5.50
Supply could shift
left due to
Decrease in the
number of
(fisherman) sellers.
S2
S1
Increase in input
prices (fuel, bait,
wages,
transportation, etc.)
2
1
D1
0
670 800
Poor fishing
Quantity (lbs)
Price per
bushel
P1
S1
S2
1
2
D1
0
In this case,
price remains
unchanged
q1
q2
D2
Quantity (bushels)
Effect of a change in
demand and supply,
part 2
Price per
bushel
P2
P1
S1
1
S2
2
D1
0
q1 q2
Now both
price and
quantity
change
D2
Quantity (bushels)
Price per
bushel
P1
S1
S0
0
1
D0
0
q0
Since the shift
backward of D
is of the same
magnitude as the shift
of S, P is unchanged.
q1
D1
Quantity (bushels)
Shortages and
surpluses
Price
At a price of $4, QS > QD
Supply by 36 videos. When the
price is $2, QD > SD
by 36 videos
Surplus
$4
$3
$2
Shortage
0
48
66
84
Demand
Quantity
Effect of Price Floors and
Ceilings
These are
government-imposed
restrictions on
market price
Examples:
Department of
Agriculture loan rates for
rice, corn, peanuts,
wheat, sorghum, etc.
The minimum wage.
Rent controls in NYC
P/BU
#2 Hard KC Wheat
Surplus
A price floor of
$3.20 per bushel will
produce a surplus
of 300 bushels.
But what if
the floor were set
at $2.35?
S
$3.20
$2.52
D
0
550 700 850
bushels
The rental
housing market in
New York City
Monthly
Rent
S
If the Rent
Control Board
sets a ceiling of
$900 per month,
3,000 apartmentseekers won’t be
able to find one.
$1,120
$900
Shortage
D
0
4,000 5,700 7,000
Rental Units