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DEMAND DECREASE AND SUPPLY INCREASE: A simultaneous decrease in the willingness and ability of buyers to purchase a good at the existing price, illustrated by a leftward shift of the demand curve, and an increase in the willingness and ability of sellers to sell a good at the existing price, illustrated by a rightward shift of the supply curve. When combined, both shifts result in an indeterminant change in equilibrium quantity and a decrease in equilibrium price.
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Lesson 8: Market Shocks | Unit 3: Single Shifts
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Page: 10 of 20
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The six steps for an increase in supply:- A determinant changes. The price of ice cream, a key resource input for hot fudge sundaes, declines.
- A curve to shifts. The supply curve for hot fudge sundaes shifts rightward.
- A shortage or a surplus occurs. The increase in supply causes a surplus of hot fudge sundaes.
- The price changes. The price of hot fudge sundaes goes down.
- The quantities demanded and supplied change. The quantity supplied for hot fudge sundaes decreases while their quantity demand is increased.
- The market imbalance is eliminated and equilibrium is restored. The surplus of hot fudge sundaes is eliminated. The price is lower and the quantity exchanged is more.
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AVERAGE REVENUE CURVE A curve that graphically represents the relation between average revenue received by a firm for selling its output and the quantity of output sold. Because average revenue is essentially the price of a good, the average revenue curve is also the demand curve for a firm's output. The average revenue curve for a firm with no market control is horizontal. The average revenue curve for a firm with market control is negatively sloped.
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WHITE GULLIBON
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Today, you are likely to spend a great deal of time watching the shopping channel seeking to buy either a turbo-powered vacuum cleaner or a battery-powered, rechargeable vacuum cleaner. Be on the lookout for high interest rates.
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