2: Supply and Demand
- Page ID
- 287924
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\(\newcommand{\avec}{\mathbf a}\) \(\newcommand{\bvec}{\mathbf b}\) \(\newcommand{\cvec}{\mathbf c}\) \(\newcommand{\dvec}{\mathbf d}\) \(\newcommand{\dtil}{\widetilde{\mathbf d}}\) \(\newcommand{\evec}{\mathbf e}\) \(\newcommand{\fvec}{\mathbf f}\) \(\newcommand{\nvec}{\mathbf n}\) \(\newcommand{\pvec}{\mathbf p}\) \(\newcommand{\qvec}{\mathbf q}\) \(\newcommand{\svec}{\mathbf s}\) \(\newcommand{\tvec}{\mathbf t}\) \(\newcommand{\uvec}{\mathbf u}\) \(\newcommand{\vvec}{\mathbf v}\) \(\newcommand{\wvec}{\mathbf w}\) \(\newcommand{\xvec}{\mathbf x}\) \(\newcommand{\yvec}{\mathbf y}\) \(\newcommand{\zvec}{\mathbf z}\) \(\newcommand{\rvec}{\mathbf r}\) \(\newcommand{\mvec}{\mathbf m}\) \(\newcommand{\zerovec}{\mathbf 0}\) \(\newcommand{\onevec}{\mathbf 1}\) \(\newcommand{\real}{\mathbb R}\) \(\newcommand{\twovec}[2]{\left[\begin{array}{r}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\ctwovec}[2]{\left[\begin{array}{c}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\threevec}[3]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\cthreevec}[3]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\fourvec}[4]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\cfourvec}[4]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\fivevec}[5]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\cfivevec}[5]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\mattwo}[4]{\left[\begin{array}{rr}#1 \amp #2 \\ #3 \amp #4 \\ \end{array}\right]}\) \(\newcommand{\laspan}[1]{\text{Span}\{#1\}}\) \(\newcommand{\bcal}{\cal B}\) \(\newcommand{\ccal}{\cal C}\) \(\newcommand{\scal}{\cal S}\) \(\newcommand{\wcal}{\cal W}\) \(\newcommand{\ecal}{\cal E}\) \(\newcommand{\coords}[2]{\left\{#1\right\}_{#2}}\) \(\newcommand{\gray}[1]{\color{gray}{#1}}\) \(\newcommand{\lgray}[1]{\color{lightgray}{#1}}\) \(\newcommand{\rank}{\operatorname{rank}}\) \(\newcommand{\row}{\text{Row}}\) \(\newcommand{\col}{\text{Col}}\) \(\renewcommand{\row}{\text{Row}}\) \(\newcommand{\nul}{\text{Nul}}\) \(\newcommand{\var}{\text{Var}}\) \(\newcommand{\corr}{\text{corr}}\) \(\newcommand{\len}[1]{\left|#1\right|}\) \(\newcommand{\bbar}{\overline{\bvec}}\) \(\newcommand{\bhat}{\widehat{\bvec}}\) \(\newcommand{\bperp}{\bvec^\perp}\) \(\newcommand{\xhat}{\widehat{\xvec}}\) \(\newcommand{\vhat}{\widehat{\vvec}}\) \(\newcommand{\uhat}{\widehat{\uvec}}\) \(\newcommand{\what}{\widehat{\wvec}}\) \(\newcommand{\Sighat}{\widehat{\Sigma}}\) \(\newcommand{\lt}{<}\) \(\newcommand{\gt}{>}\) \(\newcommand{\amp}{&}\) \(\definecolor{fillinmathshade}{gray}{0.9}\)- 2.1: Free Markets and Efficiency
- This page discusses the importance of efficient resource allocation in a thriving community, highlighting key questions of production. It compares economic inefficiency to a weakened immune system and emphasizes the need to measure worker productivity. The free market system is noted for its effectiveness in resource allocation, promising sustainability and growth as benefits of an efficient economic framework.
- 2.2: Free Markets - Sustainability
- This page emphasizes the crucial role of efficiency in an economy, likening it to an immune system that protects against various shocks. It highlights the risks of chronic inefficiency, including unemployment and crisis vulnerability, using the Soviet Union's collapse as an example. Efficient economies can effectively allocate resources and sustain safety nets in crises.
- 2.3: Free Markets – Enhanced Growth
- This page explores the similarities between economics and biology, noting that economies have health indicators such as growth rates. It indicates that growth rates differ by country based on their development stages, with developed nations growing at 2-3% and developing countries like China at 9-10%. Efficient economies, especially in free-market systems, utilize resources better, resulting in improved living standards.
- 2.4: Supply and Demand – A Form of Communication
- This page discusses the efficiency of the free market compared to other economic systems, emphasizing the roles of supply and demand in facilitating communication between suppliers and demanders. It warns that miscommunication can cause resource misallocation. It distinguishes between product markets, where households demand and businesses supply, and factor markets, where these roles reverse, with a focus on the product market.
- 2.5: Demand
- This page emphasizes the importance of both suppliers and demanders in a free market, highlighting that effective communication is vital. Demand consists of the ability and willingness to purchase goods or services, viewed more as intentions than actual sales. Price changes affect quantity demanded, while other factors like income result in shifts of the demand curve, indicating changes in overall demand.
- 2.6: Supply
- This page discusses the essentials of being a supplier, emphasizing the importance of both ability and willingness to supply goods or services. It highlights how price influences revenue and the movement along the supply curve according to the law of supply. Additionally, it explains that changes in other factors, such as labor costs or business taxes, can lead to shifts in the supply curve, impacting overall supply despite constant prices.
- 2.7: Equilibrium
- This page explores the dynamics of supply, demand, and price, highlighting how mismatches can create surpluses or shortages. It explains that falling prices increase demand and decrease supply, working towards equilibrium to minimize waste. The concept of allocative efficiency is introduced, emphasizing that social benefits and costs should align to maximize market surplus.