Chapter 3 Lecture Slides, part II

Flashcards about Nonprice determinants of supply, Taxes, Subsidies, Expectations of producers, Market supply and demand analysis, Equilibrium, and The Four-Step Process for analyzing changes in equilibrium price and quantity

List some important non-price determinants of supply.

Number of sellers in the market, Technology, Weather and climate, Input prices, Taxes and subsidies, Expectations of producers

What happens to the market supply curve when there is a decrease in taxes on production or sale of a product?

Rightward shift in market supply curve (an increase in supply)

What happens to the market supply curve when there is an increase in taxes on production or sale of a product?

Leftward shift in market supply curve (a decrease in supply)

What happens to the market supply curve when there is a decrease in subsidies for production or sale of a product?

Leftward shift in market supply curve (a decrease in supply)

What happens to the market supply curve when there is an increase in subsidies for production or sale of a product?

Rightward shift in market supply curve (an increase in supply)

What happens to the market supply curve when producers expect the price of the good will be lower in the future?

Rightward shift in market supply curve (an increase in supply) today

What happens to the market supply curve when producers expect the price of the good will be higher in the future?

Leftward shift in market supply curve (a decrease in supply) today

What is a shortage?

A market condition existing at any price where the quantity supplied is less than the quantity demanded

What is a surplus?

A market condition existing at any price where the quantity supplied is greater than the quantity demanded

What is an equilibrium?

A market condition that occurs at any price and quantity at which the quantity demanded and the quantity supplied are equal

What is the equilibrium price?

The price at which quantity demanded is equal to quantity supplied

What is the equilibrium quantity?

The quantity at which quantity demanded is equal to quantity supplied for a certain price

Describe the Four-Step Process for analyzing changes in equilibrium price and quantity.

Step 1: Draw a demand and supply model before the economic change took place,

Step 2: Decide whether economic change you are analyzing affects demand or supply (or both),

Step 3: Decide whether the effect on demand and/or supply causes the curve to shift to the left or to the right, and sketch the shifted curve(s),

Step 4: Identify the new equilibrium, and compare initial equilibrium’s price and quantity with new equilibrium’s price and quantity

Impact of S Asia and SE Asia economic growth and rising oil prices on long-haul flight market, what curves are affected?

BOTH demand curve AND supply curve affected

Impact of U.S. recession and increase in maritime wages on international container transport market, what curves are affected?

BOTH demand curve AND supply curve affected

Impact of S Asia and SE Asia economic growth and rising oil prices on long-haul flight market: how will supply and demand be affected?

Demand curve will shift to the right, supply to the left

Impact of U.S. recession and increase in maritime wages on international container transport market: how will supply and demand be affected?

Demand curve will shift to the left, supply to the left

Impact of S Asia and SE Asia economic growth and rising oil prices on long-haul flight market: what will happen to the quantity of long-haul flights?

We don't know how quantity will change

Impact of U.S. recession and increase in maritime wages on international container transport market: what will happen to the Price of shipments

We don't know how price will change