Test Yourself Which is more important in determining market equilibrium supply or demand? Is it utility or cost of production that determines value? Answer.

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Presentation transcript:

Test Yourself Which is more important in determining market equilibrium supply or demand? Is it utility or cost of production that determines value? Answer – both are important “We might as reasonably dispute whether it is the upper or lower blade of a pair of scissors that cuts a piece of paper, as whether the value is governed by utility or cost” Alfred Marshall 1920 p. 348 D S Q * Quantity Price P*P*

Test Your Self A B C D E F G What happens if demand decrease from D 1 to D 2? H D1D1 D2D2 What is new equilibrium point? Why? What is CS before / after? What is PS before / after? What is TS before / after?

Test Your Self A B C D E F G What happens if demand decrease from D 1 to D 2? H D1D1 D2D2 What is new equilibrium point? Why? Equilibrium points – B to C What is CS before / after? What is PS before / after? What is TS before / after?

Test Your Self A B C D E F G What happens if demand decreases from D 1 to D 2 ? H D1D1 D2D2 What is new equilibrium point? Why? Equilibrium points – B to C What is CS before / after? ABF to DCG What is PS before / after? What is TS before / after?

Test Your Self A B C D E F G What happens if demand decrease from D 1 to D 2? H D1D1 D2D2 What is new equilibrium point? Why? Equilibrium points – B to C What is CS before / after? ABF to DCG What is PS before / after? EBF to ECG What is TS before / after?

Test Your Self A B C D E F G What happens if demand decreases from D 1 to D 2 ? H D1D1 D2D2 What is new equilibrium point? Why? Equilibrium points – B to C What is CS before / after? ABF to DCG What is PS before / after? EBF to ECG What is TS before / after? EBA to ECD