2: True Room Numbers: Mine is at Hebb 12. I have emailed by TA to double check this!
DEMAND: The quantity the consumer is willing to purchase, given the price, Ceteris Paribus!
We all know what the ceteris paribus variables are... so now it's time for...
SUPPLY!
This is more challenging because it is more difficult to psychologically envision being a supplier.
Quantity Supplied: The quantity a firm is WILLING to sell, given the price, Ceteris Paribus
BASICALLY, as the price of a product increases, so does the quantity supplied.
$1.00 -> 7 desired sales
$0.80 -> 6 desired sales
etc. It makes sense. Suppliers want to maximize profits, so the higher a product will sell for, the more of then they would like to sell!
Four Factors:
-The firm is involved, so this is supply-side
-What is being measured is what supplied would LIKE to sell, not what is actually sold
-Quantity Supplied is dependent on price
-Ceteris Paribus
COST is the only real ceteris paribus variable. Basically, all of the other ceteris paribus variables will affect the cost of inputs required to create the product being sold. You can figure out how they affected them by using your logical brain.
(More suppliers creates less supply, ironically) (But I have to double check that)
Complimentary products are different here. Instead of just being products that go well together, they are products that you can easily produce/extract together. An example of this is oil and gas, or meat and gelatin (different parts of the same cow). Basically, as the price of gelatin goes down, the quantity supplied of gelatin goes down, and the quantity supplied of beef will also go down.
Substitute products are products where resources could go into producing one or the other, but must be allocated. An example is wheat and barley in a farmer's field. If the price of Barley goes up, the quantity supplied of barley will increase, and as such, there will be less room left in the field to plant wheat, and less resources available to harvest the wheat, so the quantity supply of wheat will decrease!
Super-easy, right? Let's see some graphs
I stole this from some other prof's online resource package, and I'm terribly sorry. This is the shape most supply curves take.
MOVEMENT:
If prices changes, SUPPLY does not change. The curve stays put. We simply look at the new price and use the graph to find a new point of demand supplied which corresponds to the price.
HOKAY: SHIFTS: There is a process to figuring them out.
Let's say the liberal government increases minimum wage (aka, they increase the cost of output)
1: Is this a shift or a movement? Well it's not a change in price or quantity, so it must be a SHIFT and not a movement along the graph
2: Does it affect demand or supply (if it affects cost, it usually affects demand)? Well the minimum wage raise creates higher costs for producers, so it affects supply.
3: How does it affect supply? It's going to raise the cost of inputs, which in turn means that supply will decrease
4: Graphically Represent this: The curve shifts to the left
Try this with other problems!
JUST REMEMBER: The buyer and seller don't know each other yet. They are on different graphs.
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