Chapter 4-5 [Market Systems + Supply/Demand + Surplus&Efficiency&DWL]

What curve is this?

Demand

What curve is this?

Supply

What does this represent?

• An increase in demand

What does this represent?

A decrease in demand

What does this represent?

An increase in supply

What does this represent?

A decrease in supply

What are the horizontal and vertical interpretations of the demand/supply curves?

• An increase/decrease is a horizontal shifting to the right/left for both supply and demand

• But an increase is a vertical upward shift for demand and a vertical downward shift for supply, while a decrease is a vertical downward shift for demand and a vertical upward shift for supply

What does this represent? Why?

An excess of supply. At that price ($50), supply greatly exceeds demand

…And would there be excess supply or demand at a price of $20.00?

• C

• Excess demand

An increase in the price of pork

Cause a supply surplus of 72

DWL is area f + g at 3850 units traded

Total consumers’ surplus is equal to area (a) + (b) + (f)

DWL would be zero

Buyer’s reservation price is $26.85 at the 3600th unit and the seller’s reservation price is $10.30 at the 3600th unit

Equal to area (i)

B