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Managerial Economics Defence 02
Managerial Economics Defence 02
E.G. Cars
INFERIOR GOODS
Goods for which demand tends to fall when income rises.
QUANTITY SUPPLIED
The amount of a particular product that a firm would be willing and able
to offer for sale at a particular price during a given time period.
Supply:LAW OF SUPPLY
LAW OF SUPPLY
The positive relationship between price and quantity of a good supplied:
An increase in market price will lead to an increase in quantity supplied,
and a decrease in market price will lead to a decrease in quantity
supplied.
SUPPLY CURVE
A graph illustrating how much of a product a firm will sell at different
prices.
SUPPLY SCHEDULE
A table showing how much of a product firms will sell at different
prices.
SUPPLY SCHEDULE
5 500
4 400
3 300
2 200
1 100
0 0
Market Supply Curve for Dosai
Supply curve:Shift of Supply VS Movement along a Supply
Curve
Supply
2.00
2. ...resulting Initial
in a higher equilibrium
price...
D2
D1
0 7 10 Quantity of
3. ...and a higher Ice-Cream Cones
quantity sold.
How a Decrease in Supply Affects the Equilibrium
Price of
Ice-Cream 1. Shortage of milk reduces
Cone the supply of ice cream...
S2
S1
New
Rs.2.50 equilibrium
0 1 2 3 4 7 8 9 10 11 12 13 Quantity of
3. ...and a lower Ice-Cream Cones
quantity sold.
Important Definitions
Equilibrium Price: The price that equates the quantity demanded
with the quantity supplied.
Equilibrium quantity: The amount that people are willing to buy and
sellers are willing to offer at the equilibrium price level.
Shortage: A market situation in which the quantity demanded
exceeds the quantity supplied
Surplus: A market situation in which the quantity supplied exceeds
the quantity demanded.
Review Questions
01. Considering following supply and demand curves for a
certain product.
Qs= 25,000p
Qd= 50000-10,000p