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Supply schedule

The supply schedule, depicted graphically as the supply curve, represents the am
ount of some good that producers are willing and able to sell at various prices,
assuming ceteris paribus, that is, assuming all determinants of supply other th
an the price of the good in question, such as technology and the prices of facto
rs of production, remain the same.
Under the assumption of perfect competition, supply is determined by marginal co
st. Firms will produce additional output as long as the cost of producing an ext
ra unit of output is less than the price they will receive.
By its very nature, conceptualizing a supply curve requires that the firm be a p
erfect competitor that is, that the firm has no influence over the market price. T
his is because each point on the supply curve is the answer to the question "If
this firm is faced with this potential price, how much output will it be able to
sell?" If a firm has market power, so its decision of how much output to provid
e to the market influences the market price, then the firm is not "faced with" a
ny price, and the question is meaningless.
Economists distinguish between the supply curve of an individual firm and the ma
rket supply curve. The market supply curve is obtained by summing the quantities
supplied by all suppliers at each potential price. Thus in the graph of the sup
ply curve, individual firms' supply curves are added horizontally to obtain the
market supply curve.
Economists also distinguish the short-run market supply curve from the long-run
market supply curve. In this context, two things are assumed constant by definit
ion of the short run: the availability of one or more fixed inputs (typically ph
ysical capital), and the number of firms in the industry. In the long run, firms
have a chance to adjust their holdings of physical capital, enabling them to be
tter adjust their quantity supplied at any given price. Furthermore, in the long
run potential competitors can enter or exit the industry in response to market
conditions. For both of these reasons, long-run market supply curves are flatter
than their short-run counterparts.
[edit] Demand schedule
The demand schedule, depicted graphically as the demand curve, represents the am
ount of some good that buyers are willing and able to purchase at various prices
, assuming all determinants of demand other than the price of the good in questi
on, such as income, personal tastes, the price of substitute goods, and the pric
e of complementary goods, remain the same. Following the law of demand, the dema
nd curve is almost always represented as downward-sloping, meaning that as price
decreases, consumers will buy more of the good.[1]
Just as the supply curves reflect marginal cost curves, demand curves are determ
ined by marginal utility curves.[2] Consumers will be willing to buy a given qua
ntity of a good, at a given price, if the marginal utility of additional consump
tion is equal to the opportunity cost determined by the price, that is, the marg
inal utility of alternative consumption choices. The demand schedule is defined
as the willingness and ability of a consumer to purchase a given product in a gi
ven frame of time.
As described above, the demand curve is generally downward-sloping. There may be
rare examples of goods that have upward-sloping demand curves. Two different hy
pothetical types of goods with upward-sloping demand curves are Giffen goods (an
inferior but staple good) and Veblen goods (goods made more fashionable by a hi
gher price).
By its very nature, conceptualizing a demand curve requires that the purchaser b
e a perfect competitor that is, that the purchaser has no influence over the marke
t price. This is because each point on the demand curve is the answer to the que
stion "If this buyer is faced with this potential price, how much of the product
will it purchase?" If a buyer has market power, so its decision of how much to
buy influences the market price, then the buyer is not "faced with" any price, a
nd the question is meaningless.
As with supply curves, economists distinguish between the demand curve of an ind
ividual and the market demand curve. The market demand curve is obtained by summ
ing the quantities demanded by all consumers at each potential price. Thus in th
e graph of the demand curve, individuals' demand curves are added horizontally t
o obtain the market demand curve.

Demand curve shifts

Main article: Demand curve
An outward (rightward) shift in demand increases both equilibrium price and quan
tityWhen consumers increase the quantity demanded at a given price, it is referr
ed to as an increase in demand. Increased demand can be represented on the graph
as the curve being shifted to the right. At each price point, a greater quantit
y is demanded, as from the initial curve D1 to the new curve D2. In the diagram,
this raises the equilibrium price from P1 to the higher P2. This raises the equ
ilibrium quantity from Q1 to the higher Q2. A movement along the curve is descri
bed as a "change in the quantity demanded" to distinguish it from a "change in d
emand," that is, a shift of the curve. In the example above, there has been an i
ncrease in demand which has caused an increase in (equilibrium) quantity. The in
crease in demand could also come from changing tastes and fashions, incomes, pri
ce changes in complementary and substitute goods, market expectations, and numbe
r of buyers. This would cause the entire demand curve to shift changing the equi
librium price and quantity. Note in the diagram that the shift of the demand cur
ve, by causing a new equilibrium price to emerge, resulted in movement along the
supply curve from the point (Q1, P1) to the point Q2, P2).
If the demand decreases, then the opposite happens: a shift of the curve to the
left. If the demand starts at D2, and decreases to D1, the equilibrium price wil
l decrease, and the equilibrium quantity will also decrease. The quantity suppli
ed at each price is the same as before the demand shift, reflecting the fact tha
t the supply curve has not shifted; but the equilibrium quantity and price are d
ifferent as a result of the change (shift) in demand.

[edit] Supply curve shifts

Main article: Supply (economics)
An outward (rightward) shift in supply reduces the equilibrium price but increas
es the equilibrium quantityWhen the suppliers' unit input costs change, or when
technological progress occurs, the supply curve shifts. For example, assume that
someone invents a better way of growing wheat so that the cost of growing a giv
en quantity of wheat decreases. Otherwise stated, producers will be willing to s
upply more wheat at every price and this shifts the supply curve S1 outward, to
S2 an increase in supply. This increase in supply causes the equilibrium price to
decrease from P1 to P2. The equilibrium quantity increases from Q1 to Q2 as cons
umers move along the demand curve to the new lower price. As a result of a suppl
y curve shift, the price and the quantity move in opposite directions.
If the quantity supplied decreases, the opposite happens. If the supply curve st
arts at S2, and shifts leftward to S1, the equilibrium price will increase and t
he equilibrium quantity will decrease as consumers move along the demand curve t
o the new higher price and associated lower quantity demanded. The quantity dema
nded at each price is the same as before the supply shift, reflecting the fact t
hat the demand curve has not shifted. But due to the change (shift) in supply, t
he equilibrium quantity and price have changed.
Demand curve
In economics, the demand curve is the graph depicting the relationship between t
he price of a certain commodity, and the amount of it that consumers are willing
and able to purchase at that given price. It is a graphic representation of a d
emand schedule.[1] The demand curve for all consumers together follows from the
demand curve of every individual consumer: the individual demands at each price
are added together. Despite its name, it is not always shown as a curve, but som
etimes as a straight line, depending on the complexity of the scenario.
Demand curves are used to estimate behaviors in competitive markets, and are oft
en combined with supply curves to estimate the equilibrium price (the price at w
hich sellers together are willing to sell the same amount as buyers together are
willing to buy, also known as market clearing price) and the equilibrium quanti
ty (the amount of that good or service that will be produced and bought without
surplus/excess supply or shortage/excess demand) of that market.[2] In a monopol
istic market, the demand curve facing the monopolist is simply the market demand

[edit] Demand schedule

See also: Market demand schedule
A demand schedule is a table that lists the quantity of a good a person will buy
at each different price[1] The demand curve is a graphical depiction of the rel
ationship between the price of a good and the quantity of the good that a consum
er would demand under certain time, place and circumstances. The demand relation
ship can also be expressed mathematically: Q = f(P; Y, Prg, Pop, X) where Q is q
uantity demanded, P is the price of the good, Prg is the price of a related good
, Y is income, Pop is population and X is the expectation of some relevant futur
e variable such as the future price of the product. The semi-colon means that th
e arguments to its right are held constant when the relationship is plotted two-
dimensionally in (price, quantity) space. If one of these other variables change
s the demand curve will shift. For example, if the population increased then the
re would be an outward (rightward) shift of the demand curve, since more consume
rs would mean higher demand. This shift is referred to as a change in demand. Mo
vements along the demand curve occur only when quantity demanded changes in resp
onse to a change in price.
Shift of a demand curve
The shift of a demand curve takes place when there is a change in any non-price
determinant of demand, resulting in a new demand curve.[3] Non-price determinant
s of demand are those things that will cause demand to change even if prices rem
ain the same in other words, the things whose changes might cause a consumer to bu
y more or less of a good even if the good's own price remained unchanged.[4] Som
e of the more important factors are the prices of related goods (both substitute
s and complements), income, population, and expectations. However, demand is the
willingness and ability of a consumer to purchase a good under the prevailing c
ircumstances; so, any relevant circumstance can be a non-price determinant of de
mand. As an example, weather could be factor in the demand for beer at a basebal
l game.
When income rises, the demand curve for normal goods shifts outward as more will
be demanded at all prices, while the demand curve for inferior goods shifts inw
ard due to the increased attainability of superior substitutes. With respect to
related goods, when the price of a good (e.g. a hamburger) rises, the demand cur
ve for substitute goods (e.g. chicken) shifts out, while the demand curve for co
mplementary goods (e.g. tomato sauce) shifts in (i.e. there is more demand for s
ubstitute goods as they become more attractive in terms of value for money, whil
e demand for complementary goods contracts in response to the contraction of qua
ntity demanded of the underlying good).[3]
[edit] Causes of shifts in demand
Changes in disposable income
Changes in taste and fashion (changes in preferences) - tastes and preferences a
re assumed to be fixed in the short-run. This assumption of fixed preferences is
a necessary condition for aggregation of individual demand curves to derive mar
ket demand.
The availability and cost of credit
Changes in the prices of related goods (substitutes and complements)
Population size and composition
Change in education level
Change in the geographical situation of buyers
Change in climate or weather - e.g. the demand for umbrellas increases when rain
is predicted.