Microeconomics Tut

orial 3

Ydonne Khor Ting Wei

Tang Xin Yue
Ong Junn Quan
Lim Shing Ying
Tan Yun Li
 Factors that cause the supply
curve to slope upward
 Higher price is an incentive to produce more of
good products.
 The incentive is in the from of higher profits.
 Per-unit production costs rise when more units of a
good are produced.
 So a higher price is necessary to elicit more output.
 A Change In Supply
 It means that suppliers are willing and able to
produce and offer to sell more or less of the good at
all prices.
 It is showed by a shift in the supply curve.
 Factors that can change supply include prices of
relevant resources, technology, number of sellers,
expectations of future price, taxes and subsidies, and
government restrictions.
 A Change In Quantity Supplied

 It means that suppliers are willing and able to produce

and offer to sell the good at higher or lower prices.
 It is shown by a movement along a supply curve.
 Factor that can directly cause a change in the quantity
supplied of a good is a change in the price of the good,
or own price.
 Price Ceiling
 Itis a government mandated maximum price above wh
ich legal trades cannot be made.
 A price at or below the ceiling is legal.
 A price above the ceiling is illegal.
 Purpose of price ceiling is to enable consumers to obta
in some “essential” goods or services that they could n
ot afford at the equilibrium price.
 Price Floor
 Itis a government mandated minimum price below w
hich legal trades cannot be made.
 A price at or above price floor is legal.
 A price below price floor is illegal.
 Purpose of price floor is to enable certain groups of re
source suppliers or producers earn sufficient income.
 Increase in the price of rela
vant resources
 When the price of relevant resources increas
e, the equilibrium price will increase.
 Thus, the quantity of a good will decrease w
hen the supply curve shift to the left side.
 Increase in the num
ber of buyers
 An increase in the number of buyers ca
n cause an increase of equilibrium pric
e and then quantity of a good will incre
ase because of demand curve shift to th
e right side.
 Government imposes a tax
 Government imposes a tax will increase th
e cost of price.
 Increase in cost will lower down the profit
earned and decrease the quantity of a good.
 Then, the supply will decrease by showing
the supply curve shift to the left side.
Consumers’ income fall because of a r
ecession and hot chocolate is consider
ed a normal good
1.Demand will decrease.
2.Demand curve will shift to the left.
3.Equilibrium quantity will decrease.
4.Equilibrium price will decrease.
The price of tea, a substitute f
or hot chocolate, falls
1.Demand will decrease.
2.Demand curve will shift to the left.
3.Equilibrium quantity will decrease.
4.Equilibrium price will decrease.
A better method of harvesting c
ocoa beans is introduced
1.Supply will increase.
2.Supply curve will shift to the right.
3.Equilibrium quantity will increase.
4.Equilibrium price will decrease.
Price of the steel used to mak
e cars has decreased
 When the price of the steel use to make cars has d
ecreased, the demand for steel will increase.
 So the supply for cars will increase too.
 Therefore, the supply curve will shift to the right.
 Equilibrium price will fall and equilibrium quantit
y will rise.
The price of cars is expected t
o increase in 3 months’ time
 When the price of the cars is expected to increase in
3 months time, the demand for cars will increase.
 Therefore, the demand curve will shift to the right.
 Equilibrium price and equilibrium quantity will rise.
 An increase in the price of petrol

 When the price of petrol increases, the d

emand for car will decrease.
 Therefore, the demand curve will shift t
o the left.
 Equilibrium price and equilibrium quant
ity will rise.