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Supply Curve
Supply Curve
Michael R. Baye, Managerial Economics and Business Strategy, 3e. The McGraw-Hill Companies, Inc. , 1999
Overview
I. Market Demand III. Market Curve Equilibrium The Demand IV. Price Function Restrictions Determinants of Demand V. Comparative Consumer Surplus Statics
Michael R. Baye, Managerial Economics and Business Strategy, 3e. The McGraw-Hill Companies, Inc. , 1999
Price
D Quantity
Michael R. Baye, Managerial Economics and Business Strategy, 3e. The McGraw-Hill Companies, Inc. , 1999
Determinants of Demand
Income Prices of substitutes Prices of complements Advertising Population Consumer expectations
Michael R. Baye, Managerial Economics and Business Strategy, 3e. The McGraw-Hill Companies, Inc. , 1999
Qxd = quantity demand of good X. Px = price of good X. PY = price of a substitute good Y. M = income. H = any other variable affecting demand
Michael R. Baye, Managerial Economics and Business Strategy, 3e. The McGraw-Hill Companies, Inc. , 1999
D0 4 7 Quantity
Michael R. Baye, Managerial Economics and Business Strategy, 3e. The McGraw-Hill Companies, Inc. , 1999
Change in Demand
Price D0 to D1: Increase in Demand
6 D1
D0 7 13 Quantity
Michael R. Baye, Managerial Economics and Business Strategy, 3e. The McGraw-Hill Companies, Inc. , 1999
Consumer Surplus:
The value consumers get from a good but do not have to pay for.
Michael R. Baye, Managerial Economics and Business Strategy, 3e. The McGraw-Hill Companies, Inc. , 1999
Michael R. Baye, Managerial Economics and Business Strategy, 3e. The McGraw-Hill Companies, Inc. , 1999
Value of 4 units
Michael R. Baye, Managerial Economics and Business Strategy, 3e. The McGraw-Hill Companies, Inc. , 1999
S0
Quantity
Michael R. Baye, Managerial Economics and Business Strategy, 3e. The McGraw-Hill Companies, Inc. , 1999
Supply Shifters
Input prices Technology or government regulations Number of firms Substitutes in production Taxes Producer expectations
Michael R. Baye, Managerial Economics and Business Strategy, 3e. The McGraw-Hill Companies, Inc. , 1999
QxS = quantity supplied of good X. Px = price of good X. PR = price of a related good W = price of inputs (e.g., wages) H = other variable affecting supply
Michael R. Baye, Managerial Economics and Business Strategy, 3e. The McGraw-Hill Companies, Inc. , 1999
A 10
1 Quantity 0 Michael R. Baye, Managerial Economics and Business Strategy, 3e. The McGraw-Hill Companies, Inc. , 5
1999
Change in Supply
Price S0 to S1: Increase in supply S0 S1
Quantity
Michael R. Baye, Managerial Economics and Business Strategy, 3e. The McGraw-Hill Companies, Inc. , 1999
Producer Surplus
The amount producers receive in excess of the amount necessary to induce them to produce the good.
Price
S0 P
*
Produce r Surplus
Q*
Quantity
Michael R. Baye, Managerial Economics and Business Strategy, 3e. The McGraw-Hill Companies, Inc. , 1999
7 6 5 D
Shortage 12 - 6 = 6 6 12
Quantity
Michael R. Baye, Managerial Economics and Business Strategy, 3e. The McGraw-Hill Companies, Inc. , 1999
14
Quantity
Michael R. Baye, Managerial Economics and Business Strategy, 3e. The McGraw-Hill Companies, Inc. , 1999
Price Restrictions
Price Ceilings
Price Floors
Michael R. Baye, Managerial Economics and Business Strategy, 3e. The McGraw-Hill Companies, Inc. , 1999
PF
P*
Qs
Q*
Quantity Qd
Michael R. Baye, Managerial Economics and Business Strategy, 3e. The McGraw-Hill Companies, Inc. , 1999
Michael R. Baye, Managerial Economics and Business Strategy, 3e. The McGraw-Hill Companies, Inc. , 1999
Surplu s
P*
Qd
Q*
QS
Quantity
Michael R. Baye, Managerial Economics and Business Strategy, 3e. The McGraw-Hill Companies, Inc. , 1999
P0 P*
Q
0
Q*
Quantity of PCs
Michael R. Baye, Managerial Economics and Business Strategy, 3e. The McGraw-Hill Companies, Inc. , 1999
Michael R. Baye, Managerial Economics and Business Strategy, 3e. The McGraw-Hill Companies, Inc. , 1999
Step 2: How will these changes affect the Big Picture in the software market?
Michael R. Baye, Managerial Economics and Business Strategy, 3e. The McGraw-Hill Companies, Inc. , 1999
D* D
Q0 Q1
Quantity of Software
Michael R. Baye, Managerial Economics and Business Strategy, 3e. The McGraw-Hill Companies, Inc. , 1999