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Principles of Economics chapters Principles of Principles ofMicroeconomics Macroeconomics
chapters chapters1. Ten Principles of Economics 1 12. Thinking Like an Economist 2 23. Interdependence and the Gains from Trade 3 34. The Market Forces of Supply and Demand 4 45. Elasticity and Applications 5 56. Supply, Demand, and Government Policies 6 67. Consumers, Producers and the Efficiency of Markets 7 78. Application: The Costs of Taxation 8 89. Application: International Trade 9 910. Externalities 10 --11. Goods and Common Resources 11 --12. The Tax System 12 --13. The Costs of Production 13 --14. The Competitive Firm 14 --15. Monopoly 15 --16. Oligopoly 16 --17. Monopolistic Competition 17 --18. The Markets for the Factors of Production 18 --19. Earnings and Discrimination 19 --20. The Distribution of Income 20 --21. The Theory of Consumer Choice 21 --22. Measuring a Nation's Wealth -- 1023. Measuring the Cost of Living -- 1124. Production and Growth -- 1225. Financial Markets: Saving, Investment, -- 13 and Interest Rates --26. Unemployment -- 1427. The Monetary System -- 1528. Inflation: Its Causes and Costs -- 1629. Open-Economy Macroeconomics: Basic Concepts -- 1730. A Macroeconomic Theory of the Open Economy -- 1831. Aggregate Demand and Aggregate Supply -- 1932. Monetary and Fiscal Policy Determinants of -- 20 Aggregate Demand33. The Short-Run Tradeoff between Inflation -- 21 andUnemployment34. Five Debates over Macroeconomic Policy -- 22
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Econ
omic
s Pa
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Sociology Pages
100
250
!"#$%&#'()#"$*(+(,%-."/0
3-2
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Car
s (m
illion
s)
Grain (millions of tons)
400
1000500
U.S.
Japan
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Car
s (m
illion
s)
Wheat (millions of bushels)
20
10
200 300150
A B
!"#$%&#'()#"$*(+(,%-."/0
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Q2 "2 G5'4("(.#5$*(*6"7'5$5'0(%8(9*-"/9(%8(U2I?(#*9&$5/<('4*(;&"/'5'0(9*-"/9*9(%8$5<"#*''*7(A0(=U(.*#$*/'(#*;&5#*7("(KU(.*#$*/'(5/$#*"7*(5/(.#5$*?(75/$*(=U_KU(aU2I2((G5'4('4*(.#5$*(%8($5<"#*''*7($&##*/'60(]=?('457(:%&69(#*;&5#*("/(5/$#*"7*(5/'4*(.#5$*('%(]E("(."$B(W%#(]E(1_E(&75/<('4*(-59.%5/'(-*'4%9Y2
A2 34*(.%65$0(:566(4"@*("(6"#<*#(*88*$'(85@*(0*"#7(8#%-(/%:('4"/(5'(9%*7(%/*(0*"#8#%-(/%:2((34*(*6"7'5$5'0(57(65B*60('%(A*(6"#<*#(5/('4*(6%/<(#&/?(75/$*(5'(-"0('"B*7%-*('5-*(8%#(.*%.6*('%(#*9&$*('4*5#($5<"#*''*(&7"<*2((34*(4"A5'(%8(7-%B5/<(5765B*60('%(A*(4"#9('%(A#*"B(5/('4*(74%#'(#&/2
$2 \5/$*('**/"<*#7(9%/H'(4"@*("7(-&$4(5/$%-*("7("9&6'7?('4*0("#*(65B*60('%(4"@*("45<4*#(.#5$*(*6"7'5$5'0(%8(9*-"/92((N67%?("9&6'7("#*(-%#*(65B*60('%(A*("995$'*9('%$5<"#*''*7?(-"B5/<(5'(-%#*(95885$&6'('%(#*9&$*('4*5#(;&"/'5'0(9*-"/9*9(5/#*7.%/7*('%("(45<4*#(.#5$*2
S2 b%&H9(*>.*$'('4*(.#5$*(*6"7'5$5'0(%8(7&..60('%(A*(6"#<*#(8%#(@"/566"(5$*($#*"-('4"/(8%#("665$*($#*"-2((N(.#%9&$*#(%8(@"/566"(5$*($#*"-($%&69(*"7560("9f&7'('4*(;&"/'5'0(%8(@"/566"5$*($#*"-("/9(.#%9&$*(%'4*#('0.*7(%8(5$*($#*"-2(()&'("(.#%9&$*#(%8(5$*($#*"-(:%&694"@*("(-%#*(95885$&6'('5-*("9f&7'5/<('4*(%@*#"66(;&"/'5'0(%8(5$*($#*"-2
1U2 "2 J"#-*#7(:4%7*($#%.7(:*#*/H'(9*7'#%0*9(A*/*85''*9(A*$"&7*('4*(9*7'#&$'5%/(%87%-*(%8('4*($#%.7(#*9&$*9('4*(7&..60?($"&75/<('4*(*;&565A#5&-(.#5$*('%(#57*2
A2 3%('*66(:4*'4*#(8"#-*#7("7("(<#%&.(:*#*(4&#'(%#(4*6.*9(A0('4*(86%%97?(0%&H9/**9('%(B/%:('4*(.#5$*(*6"7'5$5'0(%8(9*-"/92((M'($%&69(A*('4"'('4*("995'5%/"65/$%-*(*"#/*9(A0(8"#-*#7(:4%7*($#%.7(:*#*/H'(9*7'#%0*9(#%7*(-%#*(A*$"&7*(%8'4*(45<4*#(.#5$*7('4"/(8"#-*#7(:4%7*($#%.7(:*#*(9*7'#%0*9?(58(9*-"/9(575/*6"7'5$2
112 N(:%#69:59*(9#%&<4'($%&69(5/$#*"7*('4*('%'"6(#*@*/&*(%8(8"#-*#7(58('4*(.#5$*(*6"7'5$5'0%8(9*-"/9(8%#(<#"5/(57(5/*6"7'5$2((34*(9#%&<4'(#*9&$*7('4*(7&..60(%8(<#"5/?(A&'(58
!"#$%&#'()#"$*(+(,%-."/05-6
9*-"/9(57(5/*6"7'5$?('4*(#*9&$'5%/(%8(7&..60($"&7*7("(6"#<*(5/$#*"7*(5/(.#5$*2((3%'"6(8"#-#*@*/&*(:%&69(#57*("7("(#*7&6'2((M8('4*#*H7(%/60("(9#%&<4'(5/(g"/7"7?(g"/7"7H7.#%9&$'5%/(57/H'("(6"#<*(*/%&<4(.#%.%#'5%/(%8('4*('%'"6(8"#-(.#%9&$'('%(4"@*(-&$45-."$'(%/('4*(.#5$*2((N7("(#*7&6'?(.#5$*(57("A%&'(&/$4"/<*9?(:456*('4*(%&'.&'(%8(g"/7"78"#-*#7(9*$65/*7?('4&7(#*9&$5/<('4*5#(5/$%-*2
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
1E2 34*(#57*(5/('4*('">(#"'*(:%&69/H'(/*$*77"#560(5/$#*"7*('">(#*@*/&*?(75/$*(58('4*(9*-"/98%#($"#7(:*#*(*6"7'5$?('4*(#57*(5/('4*(.#5$*(%8($"#7($%&69(A*(*/%&<4('%(#*9&$*('%'"67.*/95/<(%/('4*($"#72((N7("(#*7&6'?('%'"6('">(#*@*/&*(-5<4'(4"@*(9*$65/*9?(5/7'*"9(%85/$#*"75/<2
!"#$%&#'()#"$*(+(,%-."/06-1
!"#$%&'()*(+,$$-./(0&1#23/(#23(456&'21&2%(75-898&:
;,&:%852:(<5'(=&68&>*((?2:>&':
12 3/(*4"-.5*(%6("(.#7$*($*757/8(79(':*(#*/'($%/'#%5(909'*-(7/(;*<(=%#>(,7'02((3/*4"-.5*(%6("(.#7$*(65%%#(79(':*(-7/7-&-(<"8*2((?"/0(%':*#(*4"-.5*9("#*(.%997@5*2
A2 3(9:%#'"8*(%6("(8%%B("#79*9(<:*/(':*#*(79("(@7/B7/8(.#7$*($*757/82((3(9&#.5&9(%6("(8%%B"#79*9(<:*/(':*#*(79("(@7/B7/8(.#7$*(65%%#2
C2 D$%/%-79'9(&9&"550(%..%9*($%/'#%59(%/(.#7$*9(@*$"&9*(.#7$*9(:"E*(':*($#&$7"5(F%@(%6$%%#B7/"'7/8(*$%/%-7$("$'7E7'0(@0(@"5"/$7/8(B*-"/B("/B(9&..502((G:*/(.%57$0-">*#99*'($%/'#%59(%/(.#7$*9H(':*0(%@9$&#*(':*(978/"59(':"'(8&7B*(':*("55%$"'7%/(%6(9%$7*'0I9#*9%&#$*92((J&#':*#H(.#7$*($%/'#%59(%6'*/(:&#'(':%9*(':*0("#*('#07/8('%(:*5.2
K2 3('"4(."7B(@0(@&0*#9(9:76'9(':*(B*-"/B($&#E*H(<:75*("('"4(."7B(@0(9*55*#9(9:76'9(':*9&..50($&#E*2((!%<*E*#H(':*(%&'$%-*(79(':*(9"-*(#*8"#B5*99(%6(<:%(."09(':*('"42
L2 3('"4(%/("(8%%B(#"79*9(':*(.#7$*(@&0*#9(."0H(5%<*#9(':*(.#7$*(9*55*#9(#*$*7E*H("/B#*B&$*9(':*(M&"/'7'0(9%5B2
N2 O:*(@&#B*/(%6("('"4(79(B7E7B*B(@*'<**/(@&0*#9("/B(9*55*#9(B*.*/B7/8(%/(':*(*5"9'7$7'0(%6B*-"/B("/B(9&..502((D5"9'7$7'0(#*.#*9*/'9(':*(<7557/8/*99(%6(@&0*#9(%#(9*55*#9('%(5*"E*':*(-"#>*'H(<:7$:(7/('&#/9(B*.*/B9(%/(':*7#("5'*#/"'7E*92((G:*/("(8%%B(79('"4*BH(':*97B*(%6(':*(-"#>*'(<7':(6*<*#(8%%B("5'*#/"'7E*9($"//%'(*"9750(5*"E*(':*(-"#>*'("/B(':&9@*"#9(-%#*(%6(':*(@&#B*/(%6(':*('"42
7'5@-&1:(#23(?$$-89#%852:*((?2:>&':
12 "2 J78&#*(NP1(9:%<9(':*(-"#>*'(6%#(@**#(<7':%&'(':*('"42((O:*(*M&757@#7&-(.#7$*(79Q ("/B(':*(*M&757@#7&-(M&"/'7'0(79(R 2((O:*(.#7$*(."7B(@0($%/9&-*#9(79(':*(9"-*"9(':*(.#7$*(#*$*7E*B(@0(.#%B&$*#92
Pric
e of
Bee
r
Quantity of Beer
Supply
DemandQ1
P1
Pric
e of
Bee
r
Quantity of Beer
Supply
DemandQ1Q2
P1
P2
P2 − $2
!"#$%&#'()#"$*(+(,%-."/06-2
@2 G:*/(':*('"4(79(7-.%9*BH(7'(B#7E*9("(<*B8*(%6(SA(@*'<**/(9&..50("/B(B*-"/BH"9(9:%</(7/(J78&#*(NPA2((O:*(.#7$*(."7B(@0($%/9&-*#9(79(Q H(<:75*(':*(.#7$*#*$*7E*B(@0(.#%B&$*#9(79(Q (P(SA2((O:*(M&"/'7'0(%6(@**#(9%5B(B*$57/*9('%(R 2
A2 "2 O:*(7-.%97'7%/(%6("(@7/B7/8(.#7$*(65%%#(7/(':*($:**9*(-"#>*'(79(9:%</(7/(J78&#*(NPC2((T/(':*("@9*/$*(%6(':*(.#7$*(65%%#H(':*(.#7$*(<%&5B(@*(Q ("/B(':*(M&"/'7'0(<%&5B(@*(R 2((G7':(':*(65%%#(9*'("'(Q H(<:7$:(79(8#*"'*#(':"/(Q H(':*(M&"/'7'0(B*-"/B*B(79(R H(<:75*(M&"/'7'0(9&..57*B(79(R H(9%(':*#*(79("(9&#.5&9(%6($:**9*(7/(':*("-%&/'(R (P(R 2
Pric
e of
Che
ese
Quantity of Cheese
Supply
DemandQ1Q2 Q3
P1
Pf
!"#$%&#'()#"$*(+(,%-."/06-3
@2 O:*(6"#-*#9I($%-.5"7/'(':"'(':*7#('%'"5(#*E*/&*(:"9(B*$57/*B(79($%##*$'(76(B*-"/B79(*5"9'7$2((G7':(*5"9'7$(B*-"/BH(':*(.*#$*/'"8*(B*$57/*(7/(M&"/'7'0(<%&5B(*4$**B':*(.*#$*/'"8*(#79*(7/(.#7$*H(9%('%'"5(#*E*/&*(<%&5B(B*$57/*2
$2 T6(':*(8%E*#/-*/'(.&#$:"9*9("55(':*(9&#.5&9($:**9*("'(':*(.#7$*(65%%#H(.#%B&$*#9@*/*67'("/B('"4."0*#9(5%9*2((Q#%B&$*#9($%&5B(':*/(.#%B&$*("(M&"/'7'0(R (%6$:**9*H(8"7/7/8(9&@9'"/'7"5(.#%B&$*#(9&#.5&92(()&'($%/9&-*#9(<%&5B(@&0(%/50':*(M&"/'7'0(R (%6($:**9*H(9%(':*0("#*(7/(':*(9"-*(.%97'7%/("9(@*6%#*2((O"4."0*#95%9*(@*$"&9*(':*0(<%&5B(@*(67/"/$7/8(':*(.&#$:"9*(%6(':*(9&#.5&9($:**9*2(U%$7*'0("9("(<:%5*(5%9*9(7/(':*(9*/9*(':"'('%'"5(9&#.5&9(7/(':*($:**9*(-"#>*'(79/I'@*7/8(-"47-7V*B2
C2 T6(':*(8%E*#/-*/'(7-.%9*9("(SLWW('"4(%/(5&4�($"#9H(':*(.#7$*(."7B(@0($%/9&-*#9(<755#79*(5*99(':"/(SLWWH(7/(8*/*#"52((O:*(@&#B*/(%6("/0('"4(79(9:"#*B(@0(@%':(.#%B&$*#9("/B$%/9&-*#9PP':*(.#7$*(."7B(@0($%/9&-*#9(#79*9("/B(':*(.#7$*(#*$*7E*B(@0(.#%B&$*#9(6"559H<7':(':*(B766*#*/$*(@*'<**/(':*('<%(*M&"5('%(':*("-%&/'(%6(':*('"42((O:*(%/50(*4$*.'7%/<%&5B(@*(76(':*(9&..50($&#E*(<*#*(.*#6*$'50(*5"9'7$H(7/(<:7$:($"9*($%/9&-*#9(<%&5B@*"#(':*(6&55(@&#B*/(%6(':*('"4("/B(':*(.#7$*(."7B(@0($%/9&-*#9(<%&5B(#79*(@0(*4"$'50SLWW2
K2 "2 O:*(*M&757@#7&-(.#7$*(%6(6#79@**9(79(SX("/B(':*(*M&757@#7&-(M&"/'7'0(79(N(-7557%/6#79@**92
@2 G7':("(.#7$*(65%%#(%6(S1WH(':*(/*<(-"#>*'(.#7$*(79(S1W(97/$*(':*(.#7$*(65%%#(79@7/B7/82((3'(':"'(.#7$*H(%/50(A(-7557%/(6#79@**9("#*(9%5BH(97/$*(':"'I9(':*(M&"/'7'0B*-"/B*B2
Pric
e of
Gas
olin
e
Quantity of Gasoline
S1
S2
D2
D1
Q1Q2
P1P2 − 50¢
P2
!"#$%&#'()#"$*(+(,%-."/06-4
$2 T6(':*#*I9("(.#7$*($*757/8(%6(SYH(7'(:"9(/%(*66*$'H(97/$*(':*(-"#>*'(*M&757@#7&-.#7$*(79(SXH(@*5%<(':*($*757/82((U%(':*(*M&757@#7&-(.#7$*(79(SX("/B(':**M&757@#7&-(M&"/'7'0(79(N(-7557%/(6#79@**92
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
Pric
e of
Gas
olin
e
Quantity of Gasoline
Supply
tax
tax
D2
D1
Q1 Q2
Wag
e
Quantity of Labor
Supply
Demand
unemployment
D C
BA
Q1 Q3Q2
w1
wm
!"#$%&#'()#"$*(+(,%-."/06-5
$2 O:*($%/9&-*#9(%6(8"9%57/*("#*(:&#'(@0(':*('"4(@*$"&9*(':*0(8*'(5*99(8"9%57/*("'(":78:*#(.#7$*2((
B2 G%#>*#9(7/(':*(%75(7/B&9'#0("#*(:&#'(@0(':*('"4("9(<*552((G7':("(5%<*#(M&"/'7'0(%68"9%57/*(@*7/8(.#%B&$*BH(9%-*(<%#>*#9(-"0(5%9*(':*7#(F%@92((G7':("(5%<*#(.#7$*#*$*7E*B(@0(.#%B&$*#9H(<"8*9(%6(<%#>*#9(-78:'(B*$57/*2
N2 "2 J78&#*(NPN(9:%<9(':*(*66*$'9(%6(':*(-7/7-&-(<"8*2((T/(':*("@9*/$*(%6(':*-7/7-&-(<"8*H(':*(-"#>*'(<"8*(<%&5B(@*(< ("/B(R (<%#>*#9(<%&5B(@**-.5%0*B2((G7':(':*(-7/7-&-(<"8*([< \(7-.%9*B("@%E*(< H(':*(-"#>*'(<"8*(79< H(':*(/&-@*#(%6(*-.5%0*B(<%#>*#9(79(R H("/B(':*(/&-@*#(%6(<%#>*#9(<:%("#*&/*-.5%0*B(79(R (P(R 2((O%'"5(<"8*(."0-*/'9('%(<%#>*#9("#*(9:%</("9(':*("#*"%6(#*$'"/85*(3),ZH(<:7$:(*M&"59(< ('7-*9(R 2
Pric
e of
Gun
s
Quantity of Guns
Supply
D2
D1
Q1Q2
P1P2 − tax
P2
!"#$%&#'()#"$*(+(,%-."/06-6
@2 3/(7/$#*"9*(7/(':*(-7/7-&-(<"8*(<%&5B(B*$#*"9*(*-.5%0-*/'2((O:*(97V*(%6(':**66*$'(%/(*-.5%0-*/'(B*.*/B9(%/50(%/(':*(*5"9'7$7'0(%6(B*-"/B2((O:*(*5"9'7$7'0%6(9&..50(B%*9/I'(-"''*#H(@*$"&9*(':*#*I9("(9&#.5&9(%6(5"@%#2
$2 O:*(7/$#*"9*(7/(':*(-7/7-&-(<"8*(<%&5B(7/$#*"9*(&/*-.5%0-*/'2((O:*(97V*(%6':*(#79*(7/(&/*-.5%0-*/'(B*.*/B9(%/(@%':(':*(*5"9'7$7'7*9(%6(9&..50("/B(B*-"/B2(O:*(*5"9'7$7'0(%6(B*-"/B(B*'*#-7/*9(':*(B*-"/B(6%#(5"@%#H(':*(*5"9'7$7'0(%69&..50(B*'*#-7/*9(':*(9&..50(%6(5"@%#H("/B(':*(B766*#*/$*(@*'<**/(':*(9&..50"/B(B*-"/B(6%#(5"@%#(79(':*("-%&/'(%6(&/*-.5%0-*/'2
B2 T6(':*(B*-"/B(6%#(&/9>755*B(5"@%#(<*#*(7/*5"9'7$H(':*(#79*(7/(':*(-7/7-&-(<"8*<%&5B(7/$#*"9*('%'"5(<"8*(."0-*/'9('%(&/9>755*B(5"@%#2((G7':(7/*5"9'7$(B*-"/BH':*(.*#$*/'"8*(B*$57/*(7/(*-.5%0-*/'(<%&5B(@*(5*99(':"/(':*(.*#$*/'"8*(7/$#*"9*7/(':*(<"8*H(9%('%'"5(<"8*(."0-*/'9(7/$#*"9*2((!%<*E*#H(76(':*(B*-"/B(6%#&/9>755*B(5"@%#(<*#*(*5"9'7$H('%'"5(<"8*(."0-*/'9(<%&5B(B*$57/*H(97/$*(':*/(':*.*#$*/'"8*(B*$57/*(7/(*-.5%0-*/'(<%&5B(*4$**B(':*(.*#$*/'"8*(7/$#*"9*(7/(':*(<"8*2
^2 "2 J78&#*(NP^(9:%<9(':*(*66*$'(%6("('"4(%/(8&/(@&0*#92((O:*('"4(#*B&$*9(':*(B*-"/B6%#(8&/9(6#%-(Z ('%(Z 2((O:*(#*9&5'(79("(#79*(7/(':*(.#7$*(@&0*#9(."0(6%#(8&/96#%-(Q ('%(Q H("/B("(B*$57/*(7/(':*(M&"/'7'0(%6(8&/9(6#%-(R ('%(R 2
Pric
e of
Gun
s
Quantity of Guns
Demand
S2
S1
Q1Q2
P1P2 − tax
P2Pr
ice
of G
uns
Quantity of Guns
Demand
Supply
Q1Q2 Q3
P1
Pf
!"#$%&#'()#"$*(+(,%-."/06-7
@2 J78&#*(NPX(9:%<9(':*(*66*$'(%6("('"4(%/(8&/(9*55*#92((O:*('"4(#*B&$*9(':*(9&..50%6(8&/9(6#%-(U ('%(U 2((O:*(#*9&5'(79("(#79*(7/(':*(.#7$*(@&0*#9(."0(6%#(8&/9(6#%-Q ('%(Q H("/B("(B*$57/*(7/(':*(M&"/'7'0(%6(8&/9(6#%-(R ('%(R 2
$2 J78&#*(NPY(9:%<9(':*(*66*$'(%6("(@7/B7/8(.#7$*(65%%#(%/(8&/92((O:*(7/$#*"9*(7/.#7$*(6#%-(Q ('%(Q (5*"B9('%("(B*$57/*(7/(':*(M&"/'7'0(%6(8&/9(6#%-(R ('%(R 2(O:*#*(79(*4$*99(9&..50(7/(':*(-"#>*'(6%#(8&/9H(97/$*(':*(M&"/'7'0(9&..57*B([R \*4$**B9(':*(M&"/'7'0(B*-"/B*B([R \("'(':*(.#7$*(Q 2
Pric
e of
Gun
s
Quantity of Guns
Supply
D2
D1
Q1Q2
P1P2
Pric
e of
Gun
s
Quantity of Guns
Supply
D2
D1
Q1Q2
P1P2
!"#$%&#'()#"$*(+(,%-."/06-8
B2 J78&#*(NP1W(9:%<9(':*(*66*$'(%6("('"4(%/("--&/7'7%/2((O:*('"4(%/("--&/7'7%/#*B&$*9(':*(B*-"/B(6%#(8&/9(6#%-(Z ('%(Z H(@*$"&9*("--&/7'7%/("/B(8&/9("#*$%-.5*-*/'92((O:*(#*9&5'(79("(B*$57/*(7/(':*(.#7$*(%6(8&/9(6#%-(Q ('%(Q H("/B("B*$57/*(7/(':*(M&"/'7'0(%6(8&/9(6#%-(R ('%(R 2
X2 "2 Q#%8#"-9("7-*B("'(-">7/8(':*(.&@57$("<"#*(%6(':*(B"/8*#9(%6(9-%>7/8(#*B&$*':*(B*-"/B(6%#($78"#*''*9H(9:%</(7/(J78&#*(NP11("9("(9:76'(6#%-(B*-"/B($&#E*Z ('%(Z 2((O:*(.#7$*(9&..%#'(.#%8#"-(7/$#*"9*9(':*(.#7$*(%6('%@"$$%H(<:7$:(79':*(-"7/(7/8#*B7*/'(7/($78"#*''*92((39("(#*9&5'H(':*(9&..50(%6($78"#*''*9(9:76'9('%':*(5*6'H(6#%-(U ('%(U 2((O:*(*66*$'(%6(@%':(.#%8#"-9(79('%(#*B&$*(':*(M&"/'7'0(%6$78"#*''*($%/9&-.'7%/(6#%-(R ('%(R 2
!"#$%&#'()#"$*(+(,%-."/06-9
@2 O:*($%-@7/*B(*66*$'(%6(':*('<%(.#%8#"-9(%/(':*(.#7$*(%6($78"#*''*9(79"-@78&%&92((O:*(*B&$"'7%/($"-."78/(#*B&$*9(B*-"/B(6%#($78"#*''*9H(<:7$:'*/B9('%(#*B&$*(':*(.#7$*2((O:*('%@"$$%(.#7$*(9&..%#'9(#"79*(':*($%9'(%6.#%B&$'7%/(%6($78"#*''*9H(<:7$:('*/B9('%(7/$#*"9*(':*(.#7$*2((
$2 O:*('"4"'7%/(%6($78"#*''*9(6&#':*#(#*B&$*9($78"#*''*($%/9&-.'7%/H(97/$*(7'7/$#*"9*9(':*(.#7$*('%($%/9&-*#92((39(9:%</(7/(':*(678&#*H(':*(M&"/'7'0(6"559('%R 2
Y2 "2 DM&"'7/8(M&"/'7'0(B*-"/B*B('%(M&"/'7'0(9&..57*B(87E*9(AWHWWW(P(YW(Q(_(1WHWWW`(11W(Q2((U&@'#"$'7/8(1WHWWW("/B("BB7/8(YW(Q('%(@%':(97B*9(%6(':*(*M&"'7%/87E*9(1WHWWW(_(AWW(Q2((Z7E7B7/8(@%':(97B*9(%6(':*(*M&"'7%/(@0(AWW(87E*9(Q(_LW2((Q5&887/8(':79(#*9&5'(7/'%(':*(9&..50(*M&"'7%/(87E*9(R(_(1WHWWW(`([11W(4LW\(_(1LHLWW2((U%(':*(*M&757@#7&-(.#7$*(79(SLW("/B(':*(*M&757@#7&-(M&"/'7'0(791LHLWW2
@2 G7':("(.#7$*($*757/8(%6(SKW(.*#('7$>*'H(M&"/'7'0(B*-"/B*B(79(AWHWWW(P([YW(4(KW\_(1NHKWW2((R&"/'7'0(9&..57*B(79(1WHWWW(`([11W(4(KW\(_(1KHKWW2((O:*#*a9("9:%#'"8*(7/(':*(-"#>*'(%6(AHWWW('7$>*'92((O:*(.%57$0(B*$#*"9*9(':*(/&-@*#(%6.*%.5*(<:%("''*/B($5"997$"5(-&97$($%/$*#'9H(97/$*(9&..50(79(5%<*#(@*$"&9*(%6(':*5%<*#(.#7$*2
1W2 J7#9'H(5*'a9(9**(<:"'(':*(*M&757@#7&-(.#7$*("/B(M&"/'7'0("#*(@*6%#*(':*('"4(79(7-.%9*B2(DM&"'7/8(M&"/'7'0(B*-"/B*B("/B(M&"/'7'0(9&..57*B(87E*9(AW(P(A(Q(_(Q(P(12((3BB7/8(1(`A(Q('%(@%':(97B*9(%6(':*(*M&"'7%/(87E*9(A1(_(C(Q2((Z7E7B7/8(':#%&8:(@%':(97B*9(@0(C87E*9(Q(_(^2((3'("(.#7$*(%6(S^H(*M&757@#7&-(M&"/'7'0($"/(@*(6%&/B(7/(*7':*#(':*(9&..50%#(B*-"/B(*M&"'7%/b((R(_(AW(P([A(4(^\(_(N2
G:*/(':*('"4(79(7-.%9*BH(9&..57*#9(8*'("(.#7$*(':"'a9(SC(5*99(':"/(@&0*#9(."02((c*'(Q(@*':*(.#7$*(#*$*7E*B(@0(9&..57*#92((O:*/(Q(`(C(79(':*(.#7$*(."7B(@0(@&0*#92((;%<(*M&"'7/8':*(M&"/'7'0(B*-"/B*B('%(':*(M&"/'7'0(9&..57*B(87E*9(AW(P(A[Q(`(C\(_(Q(P(1H(<:7$:($"/@*(*4."/B*B('%(AW(P(AQ(P(N(_(Q(P(12((3BB7/8(1(`(A(Q('%(@%':(97B*9(%6(':*(*M&"'7%/(87E*91L(_(C(Q2((Z7E7B7/8(':#%&8:(@%':(97B*9(@0(C(87E*9(Q(_(L2((3'("(.#7$*(%6(SLH*M&757@#7&-(M&"/'7'0($"/(@*(6%&/B(7/(*7':*#(':*(9&..50(%#(B*-"/B(*M&"'7%/b((R(_(AW(PdA(4([L`C\e(_(K2((U&..57*#9(#*$*7E*(SL(.*#(.7VV"H(<:75*(@&0*#9(."0(SXH("/(7/$#*"9*(7/.#7$*(%6(S12
112 "2 O:*(*66*$'(%6("(LW($*/'(.*#($%/*(9&@97B0(79('%(9:76'(':*(B*-"/B($&#E*(&.(@0(LW$*/'9("'(*"$:(M&"/'7'0H(97/$*("'(*"$:(M&"/'7'0("($%/9&-*#a9(<7557/8/*99('%(."0(79LW($*/'9(:78:*#2((O:*(*66*$'9(%6(9&$:("(9&@97B0("#*(9:%</(7/(J78&#*(NP1A2()*6%#*(':*(9&@97B0H(':*(.#7$*(79(Q 2((36'*#(':*(9&@97B0H(':*(.#7$*(#*$*7E*B(@09*55*#9(79(Q ("/B(':*(*66*$'7E*(.#7$*(."7B(@0($%/9&-*#9(79(Q H(<:7$:(*M&"59(Q-7/&9(LW($*/'92(()*6%#*(':*(9&@97B0H(':*(M&"/'7'0(%6($%/*9(9%5B(79(R f("6'*#(':*9&@97B0(':*(M&"/'7'0(79(R 2
Pric
e of
Ice-
Cre
am C
ones
Quantity of Ice-Cream Cones
Supply
D2
D1
Q1 Q2
P1PD
Ps
!"#$%&#'()#"$*(+(,%-."/06-10
@2 )*$"&9*(%6(':*(9&@97B0H($%/9&-*#9("#*(@*''*#(%66H(97/$*(':*0($%/9&-*(-%#*("'("5%<*#(.#7$*2((Q#%B&$*#9("#*("59%(@*''*#(%66H(97/$*(':*0(9*55(-%#*("'("(:78:*#.#7$*2((O:*(8%E*#/-*/'(5%9*9H(97/$*(7'(:"9('%(."0(6%#(':*(9&@97B02
Pric
e
Equilibrium quantityQuantity
Equilibriumprice
Supply
Demand
Producersurplus
Consumersurplus
!"#$%&#'()#"$*(+(,%-."/07-1
!"#$%&'()*(!+,-./&'-0(1'+2.3&'-0(#,2(%"&(455636&,37(+5(8#'9&%-
:.&-%6+,-(5+'(;&<6&=*((>,-=&'-
12 )&0*#34(56776/8/*33('%(."09($%/3&-*#(3&#.7&39("/:(';*(:*-"/:($&#<*("#*("77($7%3*70#*7"'*:2((=;*(;*68;'(%>(';*(:*-"/:($&#<*(#*.#*3*/'3(';*(56776/8/*33('%(."0(%>(';*?&0*#32((,%/3&-*#(3&#.7&3(63(';*("#*"(?*7%5(';*(:*-"/:($&#<*("/:("?%<*(';*(.#6$*95;6$;(*@&"73(*"$;(?&0*#43(56776/8/*33('%(."0(7*33(';*(.#6$*(%>(';*(8%%:2
A2 B*77*#34($%3'39(.#%:&$*#(3&#.7&39("/:(';*(3&..70($&#<*("#*("77($7%3*70(#*7"'*:2((=;*;*68;'(%>(';*(3&..70($&#<*(#*.#*3*/'3(';*($%3'3(%>(';*(3*77*#32((C#%:&$*#(3&#.7&3(63(';*"#*"(?*7%5(';*(.#6$*("/:("?%<*(';*(3&..70($&#<*9(5;6$;(*@&"73(';*(.#6$*(-6/&3(*"$;3*77*#34($%3'32
D2 E68&#*(FG1(3;%53(.#%:&$*#("/:($%/3&-*#(3&#.7&3(6/("(3&..70G"/:G:*-"/:(:6"8#"-2
H2 I/("77%$"'6%/(%>(#*3%&#$*3(63(*>>6$6*/'(6>(6'(-"J6-6K*3('%'"7(3&#.7&39(';*(3&-(%>$%/3&-*#(3&#.7&3("/:(.#%:&$*#(3&#.7&32(()&'(*>>6$6*/$0(-"0(/%'(?*(';*(%/70(8%"7(%>*$%/%-6$(.%76$0-"L*#3M(';*0(-"0("73%(?*($%/$*#/*:("?%&'(*@&6'0GG';*(>"6#/*33(%>(';*:63'#6?&'6%/(%>(5*77G?*6/82
Pric
e of
Lem
ons
Quantity of LemonsDemand
S2
S1
P1
P2
A
B C
!"#$%&#'()#"$*(+(,%-."/07-2
N2 =;*(6/<636?7*(;"/:(%>(';*(-"#L*'.7"$*(8&6:*3(';*(3*7>G6/'*#*3'(%>(?&0*#3("/:(3*77*#3(6/'%.#%-%'6/8(8*/*#"7(*$%/%-6$(5*77G?*6/82((O*3.6'*(:*$*/'#"76K*:(:*$636%/(-"L6/8("/:3*7>G6/'*#*3'*:(:*$636%/(-"L*#39(>#**(-"#L*'3(7*":('%("/(*>>6$6*/'(%&'$%-*2
P2 =5%('0.*3(%>(-"#L*'(>"67&#*("#*(-"#L*'(.%5*#("/:(*J'*#/"76'6*32((Q"#L*'(.%5*#(-"0$"&3*(-"#L*'(%&'$%-*3('%(?*(6/*>>6$6*/'(?*$"&3*(5;*/(>6#-3(6/>7&*/$*(.#6$*3(';*0($"&3*.#6$*("/:(@&"/'6'0('%(:6>>*#(>#%-(';*(7*<*73(';*0R:(?*(&/:*#(.*#>*$'($%-.*'6'6%/9(5;6$;L**.3('%'"7(3&#.7&3(>#%-(?*6/8(-"J6-6K*:2((SJ'*#/"76'6*3("#*(36:*(*>>*$'3(';"'("#*/R''"L*/(6/'%("$$%&/'(?0(?&0*#3("/:(3*77*#32((I3("(#*3&7'9(';*(>#**(-"#L*'(:%*3/R'(-"J6-6K*'%'"7(3&#.7&32
1'+?@&/-(#,2(>$$@63#%6+,-*((>,-=&'-
12 T>("/(*"#70(>#**K*(6/(,"76>%#/6"(3%(';*(7*-%/($#%.9(';*(3&..70($&#<*(>%#(7*-%/3(3;6>'3'%(';*(7*>'9("3(3;%5/(6/(E68&#*(FGA2((=;*(#*3&7'(63("(#63*(6/(';*(.#6$*(%>(7*-%/3("/:(":*$76/*(6/($%/3&-*#(3&#.7&3(>#%-(I(U()(U(,('%(V&3'(I2((B%($%/3&-*#(3&#.7&3(:*$76/*3?0(';*("-%&/'()(U(,2
T/(';*(-"#L*'(>%#(7*-%/":*9(';*(;68;*#($%3'(%>(7*-%/3(#*:&$*3(';*(3&..70(%>(7*-%/":*9"3(3;%5/(6/(E68&#*(FGD2((=;*(#*3&7'(63("(#63*(6/(';*(.#6$*(%>(7*-%/":*("/:("(:*$76/*(6/$%/3&-*#(3&#.7&3(>#%-(O(U(S(U(E('%(V&3'(O9("(7%33(%>(S(U(E2((W%'*(';"'("/(*<*/'(';"'">>*$'3($%/3&-*#(3&#.7&3(6/(%/*(-"#L*'(%>'*/(;"3(*>>*$'3(%/($%/3&-*#(3&#.7&3(6/(%';*#-"#L*'32
Pric
e of
Lem
onad
e
Quantity of Lemonade
Demand
S2
S1
P1
P2
D
E F
Pric
e of
Fre
nch
Brea
d
Quantity of French Bread
Supply
D1
D2
Q1 Q2
P1
P2
AB C
!"#$%&#'()#"$*(+(,%-."/07-3
A2 I(#63*(6/(';*(:*-"/:(>%#(E#*/$;(?#*":(7*":3('%("/(6/$#*"3*(6/(.#%:&$*#(3&#.7&3(6/(';*-"#L*'(>%#(E#*/$;(?#*":9("3(3;%5/(6/(E68&#*(FGH2((=;*(3;6>'(%>(';*(:*-"/:($&#<*(7*":3'%("/(6/$#*"3*:(.#6$*9(5;6$;(6/$#*"3*3(.#%:&$*#(3&#.7&3(>#%-("#*"(I('%("#*"(I(U()(U,2
Pric
e of
Flo
ur
Quantity of Flour
Supply
D2D1
P1
P2
DE F
!"#$%&#'()#"$*(+(,%-."/07-4
=;*(6/$#*"3*:(@&"/'6'0(%>(E#*/$;(?#*":(?*6/8(3%7:(6/$#*"3*3(';*(:*-"/:(>%#(>7%	("33;%5/(6/(E68&#*(FGN2((I3("(#*3&7'9(';*(.#6$*(%>(>7%&#(#63*39(6/$#*"36/8(.#%:&$*#(3&#.7&3>#%-("#*"(O('%(O(U(S(U(E2((W%'*(';"'("/(*<*/'(';"'(">>*$'3(.#%:&$*#(3&#.7&3(6/(%/*-"#L*'(7*":3('%(*>>*$'3(%/(.#%:&$*#(3&#.7&3(6/(#*7"'*:(-"#L*'32(
D2 "2 )*#'R3(:*-"/:(3$;*:&7*(63X(((((((((((
C#6$* Y&"/'6'0(:*-"/:*:
Q%#*(';"/(ZF [ZN('%(ZF 1ZD('%(ZN AZ1('%(ZD DZ1(%#(7*33 H
)*#'R3(:*-"/:($&#<*(63(3;%5/(6/(E68&#*(FGP2
?2 \;*/(';*(.#6$*(%>("(?%''7*(%>(5"'*#(63(ZH9()*#'(?&03('5%(?%''7*3(%>(5"'*#2((!63$%/3&-*#(3&#.7&3(63(3;%5/("3("#*"(I(6/(';*(>68&#*2((!*(<"7&*3(;63(>6#3'(?%''7*(%>5"'*#("'(ZF9(?&'(."03(%/70(ZH(>%#(6'9(3%(;"3($%/3&-*#(3&#.7&3(%>(ZD2((!*(<"7&*3;63(3*$%/:(?%''7*(%>(5"'*#("'(ZN9(?&'(."03(%/70(ZH(>%#(6'9(3%(;"3($%/3&-*#3&#.7&3(%>(Z12((=;&3()*#'R3('%'"7($%/3&-*#(3&#.7&3(63(ZD(U(Z1(](ZH9(5;6$;(63';*("#*"(%>(I(6/(';*(>68&#*2
Pric
e of
Wat
er
Quantity of Water
A
B
1
$7
$6
$5
$4
$3
$2
$1
2 3 4
!"#$%&#'()#"$*(+(,%-."/07-5
$2 \;*/(';*(.#6$*(%>("(?%''7*(%>(5"'*#(>"773(>#%-(ZH('%(ZA9()*#'(?&03(';#**(?%''7*3%>(5"'*#9("/(6/$#*"3*(%>(%/*2((!63($%/3&-*#(3&#.7&3($%/363'3(%>(?%';("#*"3(I("/:)(6/(';*(>68&#*9("/(6/$#*"3*(6/(';*("-%&/'(%>("#*"()2((!*(8*'3($%/3&-*#(3&#.7&3%>(ZN(>#%-(';*(>6#3'(?%''7*(^ZF(<"7&*(-6/&3(ZA(.#6$*_9(ZD(>#%-(';*(3*$%/:(?%''7*^ZN(<"7&*(-6/&3(ZA(.#6$*_9("/:(Z1(>#%-(';*(';6#:(?%''7*(^ZD(<"7&*(-6/&3(ZA.#6$*_9(>%#("('%'"7($%/3&-*#(3&#.7&3(%>(Z`2((=;&3($%/3&-*#(3&#.7&3(#63*3(?0(ZN^5;6$;(63(';*(36K*(%>("#*"()_(5;*/(';*(.#6$*(%>("(?%''7*(%>(5"'*#(>"773(>#%-(ZH('%ZA2
H2 "2 S#/6*R3(3&..70(3$;*:&7*(>%#(5"'*#(63X
C#6$* Y&"/'6'0(3&..76*:
Q%#*(';"/(ZF HZN('%(ZF DZD('%(ZN AZ1('%(ZD 1Z1(%#(7*33 [
Pric
e of
Wat
er
Quantity of Water
A
B
1
$7$6$5$4$3$2$1
2 3 4
!"#$%&#'()#"$*(+(,%-."/07-6
S#/6*R3(3&..70($&#<*(63(3;%5/(6/(E68&#*(FGF2
?2 \;*/(';*(.#6$*(%>("(?%''7*(%>(5"'*#(63(ZH9(S#/6*(3*773('5%(?%''7*3(%>(5"'*#2((!63.#%:&$*#(3&#.7&3(63(3;%5/("3("#*"(I(6/(';*(>68&#*2((!*(#*$*6<*3(ZH(>%#(;63(>6#3'?%''7*(%>(5"'*#9(?&'(6'($%3'3(%/70(Z1('%(.#%:&$*9(3%(S#/6*(;"3(.#%:&$*#(3&#.7&3(%>ZD2((!*("73%(#*$*6<*3(ZH(>%#(;63(3*$%/:(?%''7*(%>(5"'*#9(5;6$;($%3'3(ZD('%.#%:&$*9(3%(;*(;"3(.#%:&$*#(3&#.7&3(%>(Z12((=;&3(S#/6*R3('%'"7(.#%:&$*#(3&#.7&363(ZD(U(Z1(](ZH9(5;6$;(63(';*("#*"(%>(I(6/(';*(>68&#*2
$2 \;*/(';*(.#6$*(%>("(?%''7*(%>(5"'*#(#63*3(>#%-(ZH('%(ZP9(S#/6*(3*773(';#**(?%''7*3%>(5"'*#9("/(6/$#*"3*(%>(%/*2((!63(.#%:&$*#(3&#.7&3($%/363'3(%>(?%';("#*"3(I("/:)(6/(';*(>68&#*9("/(6/$#*"3*(?0(';*("-%&/'(%>("#*"()2((!*(8*'3(.#%:&$*#(3&#.7&3%>(ZN(>#%-(';*(>6#3'(?%''7*(^ZP(.#6$*(-6/&3(Z1($%3'_9(ZD(>#%-(';*(3*$%/:(?%''7*^ZP(.#6$*(-6/&3(ZD($%3'_9("/:(Z1(>#%-(';*(';6#:(?%''7*(^ZP(.#6$*(-6/&3(ZN(.#6$*_9>%#("('%'"7(.#%:&$*#(3&#.7&3(%>(Z`2((=;&3(.#%:&$*#(3&#.7&3(#63*3(?0(ZN(^5;6$;(63';*(36K*(%>("#*"()_(5;*/(';*(.#6$*(%>("(?%''7*(%>(5"'*#(#63*3(>#%-(ZH('%(ZP2
N2 "2 E#%-(S#/6*R3(3&..70(3$;*:&7*("/:()*#'R3(:*-"/:(3$;*:&7*9(';*(@&"/'6'0:*-"/:*:("/:(3&..76*:("#*X
C#6$* Y&"/'6'0(3&..76*: Y&"/'6'0(:*-"/:*:
((ZA (1 (D((ZH (A (A((ZP (D (1
Pric
e of
Com
pute
rs
Quantity of Computers
Demand
S2S1
P1
Q1 Q2
P2DG
CB
A
E F
!"#$%&#'()#"$*(+(,%-."/07-7
a/70("(.#6$*(%>(ZH(?#6/83(3&..70("/:(:*-"/:(6/'%(*@&676?#6&-9(56';("/*@&676?#6&-(@&"/'6'0(%>(A2
?2 I'("(.#6$*(%>(ZH9($%/3&-*#(3&#.7&3(63(ZH("/:(.#%:&$*#(3&#.7&3(63(ZH9("3(3;%5/(6/.#%?7*-3(D("/:(H2((=%'"7(3&#.7&3(63(ZH(U(ZH(](Zb2
$2 T>(S#/6*(.#%:&$*:(%/*(>*5*#(?%''7*9(;63(.#%:&$*#(3&#.7&3(5%&7:(:*$76/*('%(ZD9("33;%5/(6/(.#%?7*-(H2((T>()*#'($%/3&-*:(%/*(>*5*#(?%''7*9(;63($%/3&-*#(3&#.7&35%&7:(:*$76/*('%(ZD9("3(3;%5/(6/(.#%?7*-(D2((B%('%'"7(3&#.7&3(5%&7:(:*$76/*('%ZD(U(ZD(](ZP2
:2 T>(S#/6*(.#%:&$*:(%/*("::6'6%/"7(?%''7*(%>(5"'*#9(;63($%3'(5%&7:(?*(ZN9(?&'(';*.#6$*(63(%/70(ZH9(3%(;63(.#%:&$*#(3&#.7&3(5%&7:(:*$76/*(?0(Z12((T>()*#'($%/3&-*:%/*("::6'6%/"7(?%''7*(%>(5"'*#9(;63(<"7&*(5%&7:(?*(ZD9(?&'(';*(.#6$*(63(ZH9(3%(;63$%/3&-*#(3&#.7&3(5%&7:(:*$76/*(?0(Z12((B%('%'"7(3&#.7&3(:*$76/*3(?0(Z1(U(Z1(]ZA2
P2 "2 =;*(*>>*$'(%>(>"776/8(.#%:&$'6%/($%3'3(6/(';*(-"#L*'(>%#($%-.&'*#3(#*3&7'3(6/("3;6>'('%(';*(#68;'(6/(';*(3&..70($&#<*9("3(3;%5/(6/(E68&#*(FGb2((I3("(#*3&7'9(';**@&676?#6&-(.#6$*(%>($%-.&'*#3(:*$76/*3("/:(';*(*@&676?#6&-(@&"/'6'0(6/$#*"3*32
Pric
e of
Com
pute
rs
Quantity of Computers
S2
S1
Demand
A
B
!"#$%&#'()#"$*(+(,%-."/07-8
?2 =;*(:*$76/*(6/(';*(.#6$*(%>($%-.&'*#3(6/$#*"3*3($%/3&-*#(3&#.7&3(>#%-("#*"(I('%I(U()(U(,(U(O9("/(6/$#*"3*(6/(';*("-%&/'()(U(,(U(O2((C#6%#('%(';*(3;6>'(6/3&..709(.#%:&$*#(3&#.7&3(5"3("#*"3()(U(S(^';*("#*"("?%<*(';*(3&..70($&#<*("/:?*7%5(';*(.#6$*_2((I>'*#(';*(3;6>'(6/(3&..709(.#%:&$*#(3&#.7&3(63("#*"3(S(U(E(Uc2((B%(.#%:&$*#(3&#.7&3($;"/8*3(?0(';*("-%&/'(E(U(c(G()9(5;6$;(-"0(?*.%36'6<*(%#(/*8"'6<*2((=;*(6/$#*"3*(6/(@&"/'6'0(6/$#*"3*3(.#%:&$*#(3&#.7&39(5;67*';*(:*$76/*(6/(';*(.#6$*(#*:&$*3(.#%:&$*#(3&#.7&32((B6/$*($%/3&-*#(3&#.7&3(#63*3?0()(U(,(U(O("/:(.#%:&$*#(3&#.7&3(#63*3(?0(E(U(c(G()9('%'"7(3&#.7&3(#63*3(?0,(U(O(U(E(U(c2
$2 T>(';*(3&..70(%>($%-.&'*#3(63(<*#0(*7"3'6$9(';*/(';*(3;6>'(%>(';*(3&..70($&#<*?*/*>6'3($%/3&-*#3(-%3'2((=%('"L*(';*(-%3'(:#"-"'6$($"3*9(3&..%3*(';*(3&..70$&#<*(5*#*(;%#6K%/'"79("3(3;%5/(6/(E68&#*(FG`2((=;*/(';*#*(63(/%(.#%:&$*#3&#.7&3("'("772((,%/3&-*#3($".'&#*("77(';*(?*/*>6'3(%>(>"776/8(.#%:&$'6%/($%3'3956';($%/3&-*#(3&#.7&3(#636/8(>#%-("#*"(I('%("#*"(I(U()2
F2 "2 E68&#*(FG1[(3;%53(3&..70("/:(:*-"/:($&#<*3(>%#(;"6#$&'32((B&..70(*@&"73:*-"/:("'("(@&"/'6'0(%>(';#**(;"6#$&'3("/:("(.#6$*(?*'5**/(ZH("/:(ZN2((E6#-3(I9,9("/:(O(3;%&7:($&'(';*(;"6#(%>(B"7709(C;679("/:(c*#"7:%2((a.#";R3(56776/8/*33('%."0(63('%%(7%5("/:(>6#-()R3($%3'3("#*('%%(;68;9(3%(';*0(:%(/%'(."#'6$6."'*2((=;*-"J6-&-('%'"7(3&#.7&3(63(';*("#*"(?*'5**/(';*(:*-"/:("/:(3&..70($&#<*395;6$;('%'"73(Z11(^Zb(<"7&*(-6/&3(ZA($%3'(>%#(';*(>6#3'(;"6#$&'9(.7&3(ZF(<"7&*-6/&3(ZD($%3'(>%#(';*(3*$%/:9(.7&3(ZN(<"7&*(-6/&3(ZH($%3'(>%#(';*(';6#:_2
Pric
e of
Hai
rcut
Quantity of Haircuts
A
B
C
D
1
$8$7$6$5$4$3$2$1
2 3 4
Sally
Phil
Geraldo
Oprah
Pric
e
Quantity
Supply
DemandQ1Q2
A
!"#$%&#'()#"$*(+(,%-."/07-9
?2 T'R3(8%%:(';"'(>6#-3(I9(,9("/:(O("#*($&''6/8(;"6#9(36/$*(';*0("#*(';*(7%5*3'($%3'.#%:&$*#32(()&'(B"770(d*336*(<"7&*3("(;"6#$&'("'(Zb9(5;67*(a.#";(<"7&*3(6'("'(%/70ZA2((B%('%'"7(3&#.7&3($%&7:(?*(6/$#*"3*:(?0(ZP(6>(B"770(d*336*(;":(;*#(;"6#($&'6/3'*":(%>(a.#";2
b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
Pric
eQuantity
Supply
DemandQ1 Q3
B
Pric
e of
Med
ical
Pro
cedu
re
Quantity of Medical Procedures
Supply
DemandQ1 Q2
$100
$20
!"#$%&#'()#"$*(+(,%-."/07-10
`2 "2 E68&#*(FG1D(677&3'#"'*3(';*(:*-"/:(>%#(-*:6$"7($"#*2((T>(*"$;(.#%$*:&#*(;"3(".#6$*(%>(Z1[[9(@&"/'6'0(:*-"/:*:(5677(?*(Y (.#%$*:&#*32
?2 T>($%/3&-*#3(."0(%/70(ZA[(.*#(.#%$*:&#*9(';*(@&"/'6'0(:*-"/:*:(5677(?*(Y.#%$*:&#*32((B6/$*(';*($%3'('%(3%$6*'0(63(Z1[[9(';*(/&-?*#(%>(.#%$*:&#*3.*#>%#-*:(63('%%(7"#8*('%(-"J6-6K*('%'"7(3&#.7&32((=;*(@&"/'6'0(';"'(-"J6-6K*3'%'"7(3&#.7&3(63(Y (.#%$*:&#*39(5;6$;(63(7*33(';"/(Y 2(
$2 =;*(&3*(%>(-*:6$"7($"#*(63(*J$*336<*(6/(';*(3*/3*(';"'($%/3&-*#3(8*'(.#%$*:&#*35;%3*(<"7&*(63(7*33(';"/(';*($%3'(%>(.#%:&$6/8(';*-2
Pric
e of
Wat
er
Quantity of Water
Demand
Shortage
S2
S1
Q1Q3
P1
P2
Q2
!"#$%&#'()#"$*(+(,%-."/07-11
:2 =%(.#*<*/'(';63(*J$*336<*(&3*9(';*($%/3&-*#(-&3'(?*"#(';*(-"#86/"7($%3'(%>(';*.#%$*:&#*2(()&'(';63(5%&7:(#*@&6#*(*76-6/"'6/8(6/3&#"/$*2((I/%';*#(.%336?676'05%&7:(?*(';"'(';*(6/3&#"/$*($%-."/09(5;6$;(."03(-%3'(%>(';*(-"#86/"7($%3'(%>';*(.#%$*:&#*(^Zb[9(6/(';63($"3*_($%&7:(:*$6:*(5;*';*#(';*(.#%$*:&#*(3;%&7:(?*.*#>%#-*:2(()&'(';*(6/3&#"/$*($%-."/0(:%*3/4'(8*'(';*(?*/*>6'3(%>(';*.#%$*:&#*9(3%(6'3(:*$636%/3(-"0(/%'(#*>7*$'(';*(<"7&*('%(';*($%/3&-*#2
1[2 "2 E68&#*(FG1H(677&3'#"'*3(';*(*>>*$'(%>(';*(:#%&8;'2((=;*(3&..70($&#<*(3;6>'3('%(';*7*>'9(7*":6/8('%("(#63*(6/(';*(*@&676?#6&-(.#6$*(>#%-(C ('%(C ("/:("(:*$76/*(6/(';**@&676?#6&-(@&"/'6'0(>#%-(Y ('%(Y 2
?2 T>(';*(.#6$*(%>(5"'*#(63(/%'("77%5*:('%($;"/8*9(';*#*(5677(?*("/(*J$*33(:*-"/:>%#(5"'*#9(56';(';*(3;%#'"8*(3;%5/(%/(';*(>68&#*("3(';*(:6>>*#*/$*(?*'5**/(Y"/:(Y 2
$2 =;*(303'*-(>%#("77%$"'6/8(5"'*#(63(6/*>>6$6*/'(?*$"&3*(6'(/%(7%/8*#("77%$"'*35"'*#('%(';%3*(5;%(<"7&*(6'(-%3'(;68;702((B%-*(.*%.7*(5;%(<"7&*(5"'*#("'(-%#*';"/(6'3($%3'(%>(.#%:&$'6%/(5677(?*(&/"?7*('%(%?'"6/(6'9(3%(3%$6*'0R3('%'"7(3&#.7&363/R'(-"J6-6K*:2
=;*("77%$"'6%/(303'*-(3**-3(&/>"6#("3(5*772((\"'*#(63("77%$"'*:(36-.70(%/(."3'&3"8*9(#*5"#:6/8(."3'(5"3'*>&7/*332((T>("(>"-670R3(:*-"/:(>%#(5"'*#(6/$#*"3*393"0(?*$"&3*(%>("/(6/$#*"3*(6/(>"-670(36K*9(';*(.%76$0(:%*3/R'("77%5(';*-('%
!"#$%&#'()#"$*(+(,%-."/07-12
%?'"6/(-%#*(5"'*#2((C%%#(>"-676*39(5;%(.#%?"?70(&3*:(5"'*#(-%3'70(>%#/*$*33"#0(&3*3(76L*(:#6/L6/89(5%&7:(3&>>*#(-%#*(';"/(5*"7';6*#(>"-676*3(5;%5%&7:(;"<*('%($&'(?"$L(%/70(%/(7&J�(&3*3(%>(5"'*#(76L*(%.*#"'6/8(?"$L0"#:>%&/'"6/3("/:(.%%732((!%5*<*#9(';*(.%76$0("73%(L**.3(';*(.#6$*(%>(5"'*#(7%5*#95;6$;(?*/*>6'3(.%%#(>"-676*39(36/$*(%';*#563*(-%#*(%>(';*6#(>"-670(?&:8*'(5%&7:;"<*('%(8%(>%#(5"'*#2
:2 T>(';*($6'0("77%5*:(';*(.#6$*(%>(5"'*#('%(#63*('%(6'3(*@&676?#6&-(.#6$*(C 9(';*"77%$"'6%/(5%&7:(?*(-%#*(*>>6$6*/'2((Y&"/'6'0(3&..76*:(5%&7:(*@&"7(@&"/'6'0:*-"/:*:("/:(';*#*(5%&7:(?*(/%(3;%#'"8*2((=%'"7(3&#.7&3(5%&7:(?*(-"J6-6K*:2
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
Pric
e
Quantity
Supply
Demand
Q1Q2
P1Ps
PB
A
B
EC
DF
!"#$%&#'()#"$*(+(,%-."/08-1
!"#$%&'()*((+$$,-.#%-/0*((1"&(!/2%2(/3(1#4#%-/0
56&2%-/02(3/'(7&8-&9*((+029&'2
12 34*/('4*(5"6*(%7("(8%%9(:5('";*9<(=%'4($%/5&-*#(5&#.6&5("/9(.#%9&$*#(5&#.6&5(9*$6:/*2(>4*(9*$6:/*(:/($%/5&-*#(5&#.6&5("/9(.#%9&$*#(5&#.6&5(*;$**95('4*("-%&/'(%78%?*#/-*/'(#*?*/&*('4"'@5(#":5*9<(5%(5%$:*'0@5('%'"6(5&#.6&5(9*$6:/*52((>4*('";(9:5'%#'5'4*(:/$*/':?*5(%7(=%'4(=&0*#5("/9(5*66*#5<(5%(#*5%&#$*5("#*("66%$"'*9(:/*77:$:*/'602
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
O2 >4*(8#*"'*#('4*(*6"5':$:':*5(%7(9*-"/9("/9(5&..60<('4*(8#*"'*#('4*(9*"9E*:84'(6%55(%7("'";2((P:/$*(*6"5':$:'0(-*"5&#*5('4*(#*5.%/5*(%7(F&"/':'0('%("($4"/8*(:/(.#:$*<(4:84*#*6"5':$:'0(-*"/5('4*('";(:/9&$*5("(8#*"'*#(#*9&$':%/(:/(F&"/':'0<(4*/$*("(8#*"'*#9:5'%#':%/('%('4*(-"#Q*'2
Pric
e of
Piz
za
Quantity of Pizza
Supply
DemandQ1Q2
P1
Ps
PBA
BEC
DF
!"#$%&#'()#"$*(+(,%-."/08-2
R2 >4*(9*"9E*:84'(6%55(%7("('";(#:5*5(-%#*('4"/(.#%.%#':%/"660("5('4*('";(#:5*52((>";#*?*/&*<(4%E*?*#<(-"0(:/$#*"5*(:/:':"660("5('4*('";(#:5*5<(=&'("5('4*('";(#:5*5(7&#'4*#<#*?*/&*(#:5*5(6*55('4"/(.#%.%#':%/"660("/9(*?*/'&"660(9*$6:/*52
:'/;,&<2(#0=(+$$,-.#%-/02*((+029&'2
12 "2 B:8&#*(CDA(:66&5'#"'*5('4*(-"#Q*'(7%#(.:SS"2((>4*(*F&:6:=#:&-(.#:$*(:5(H <('4**F&:6:=#:&-(F&"/':'0(:5(G <($%/5&-*#(5&#.6&5(:5("#*"(IJ)J,<("/9(.#%9&$*#5&#.6&5(:5("#*"(KJLJB2((>4*#*(:5(/%(9*"9E*:84'(6%55<("5("66('4*(.%'*/':"6(8":/57#%-('#"9*("#*(#*"6:S*9T('%'"6(5&#.6&5(:5('4*(*/':#*("#*"(=*'E**/('4*(9*-"/9("/95&..60($&#?*5DDIJ)J,JKJLJB2
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Pric
e of
Rub
ber B
ands
Quantity of Rubber Bands
Supply
Demand
A B
C D
Pric
e of
Rub
ber B
ands
Quantity of Rubber Bands
Supply
Demand
AB
C D
!"#$%&#'()#"$*(+(,%-."/08-4
=2 3:'4(?*#0(:/*6"5':$(5&..60("/9(?*#0(*6"5':$(9*-"/9<('4*(=	*/(%7('4*('";(%/#&==*#(="/95(E:66(=*(=%#/*(6"#8*60(=0(5*66*#52((I5(B:8&#*(CDR(54%E5<($%/5&-*#5&#.6&5(9%*5/@'(9*$6:/*(-&$4<([&5'(=0("#*"(IJ)<(E4:6*(.#%9&$*#(5&#.6&5(7"6655&=5'"/':"660<(=0("#*"(,JK2
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!"#$%&#'()#"$*(+(,%-."/08-5
=2 >4*('";(#*?*/&*(:5(6:Q*60('%(=*(4:84*#(:/('4*(7:#5'(0*"#("7'*#(:'(:5(:-.%5*9('4"/(:/'4*(7:7'4(0*"#2((V/('4*(7:#5'(0*"#<(9*-"/9(:5(-%#*(:/*6"5':$<(5%('4*(F&"/':'09%*5/@'(9*$6:/*("5(-&$4("/9('";(#*?*/&*(:5(#*6"':?*60(4:842((I5(':-*(."55*5("/9-%#*(.*%.6*(5&=5':'&'*("E"0(7#%-(%:6<('4*(*F&:6:=#:&-(F&"/':'0(9*$6:/*5<("5(9%*5'";(#*?*/&*2
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^2 "2 >4:5('";(4"5(5&$4("(4:84(#"'*('4"'(:'(:5/@'(6:Q*60('%(#":5*(-&$4(#*?*/&*2(()*$"&5*%7('4*(4:84('";(#"'*<('4*(*F&:6:=#:&-(F&"/':'0(:/('4*(-"#Q*'(:5(6:Q*60('%(=*("'(%#/*"#(S*#%2
=2 P*/"'%#(_%0/:4"/@5(8%"6(E"5(.#%="=60('%(="/('4*(&5*(%7(4%66%ED':..*9(=&66*'52(V/('4:5($"5*<("('";(:5("5(*77*$':?*("5("/(%&'#:84'(="/2
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
=2 >4*(.#:$*(#*$*:?*9(=0(.#%9&$*#5(7"665(=*$"&5*(%7('4*('";<(&/6*55(5&..60(:5.*#7*$'60(*6"5':$2((>%'"6(#*$*:.'5(7%#(.#%9&$*#5(7"66<(5:/$*(.#%9&$*#5(6%5*(#*?*/&**F&"6('%("#*"()JLJB2((
Pric
e of
Soc
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Quantity of Socks
Supply
Demand
Q1Q2
P1Ps
PBA
B E
C
D F
!"#$%&#'()#"$*(+(,%-."/08-6
$2 >4*(.#:$*(.":9(=0($%/5&-*#5(#:5*5<(&/6*55(9*-"/9(:5(.*#7*$'60(*6"5':$2((34*'4*#'%'"6(5.*/9:/8(=0($%/5&-*#5(#:5*5(%#(7"665(9*.*/95(%/('4*(.#:$*(*6"5':$:'0(%79*-"/92((V7(9*-"/9(:5(*6"5':$<('4*(.*#$*/'"8*(9*$6:/*(:/(F&"/':'0(*;$**95('4*.*#$*/'"8*(:/$#*"5*(:/(.#:$*<(5%('%'"6(5.*/9:/8(9*$6:/*52((V7(9*-"/9(:5(:/*6"5':$<'4*(.*#$*/'"8*(9*$6:/*(:/(F&"/':'0(:5(6*55('4"/('4*(.*#$*/'"8*(:/$#*"5*(:/(.#:$*<5%('%'"6(5.*/9:/8(#:5*52((34*'4*#('%'"6($%/5&-*#(5.*/9:/8(7"665(%#(#:5*5<$%/5&-*#(5&#.6&5(9*$6:/*5(=*$"&5*(%7('4*(:/$#*"5*(:/(.#:$*("/9(#*9&$':%/(:/F&"/':'02
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1Y2 "2 B:8&#*(CD](:66&5'#"'*5('4*(*77*$'5(%7('4*('";(:/$#*"5*(%/('4*(/*E($"#(-"#Q*'(:/N*E(c*#5*02((>4*(F&"/':'0(%7($"#5(5%69(9*$6:/*5(7#%-(G ('%(G <('4*(.#:$*(.":9(=0$%/5&-*#5(#:5*5(7#%-(H ('%((H <("/9('4*(.#:$*(#*$*:?*9(=0(.#%9&$*#5(9*$6:/*57#%-(H ('%((H <(E4*#*(H (M(H (J(U1YY("/9(H (M(H (J(U1\Y2
Pric
e of
Car
s
Quantity of Cars
Supply
Demand
Q1Q2
PB2
PB1
PS1
PS2
A
B
E
G
C
D
F
H
!"#$%&#'()#"$*(+(,%-."/08-7
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92 >4*($4"/8*(:/(9*"9E*:84'(6%55(:5(.%5:':?*<("5(:'(:/$#*"5*5(=0(,JLJd<(-*"/:/8'4"'('4*(*$%/%-0("5("(E4%6*(:5(E%#5*(%772
*2 >4*(9*-"/9(7%#($"#5(:/(N*E(c*#5*0(:5(.#%="=60(7":#60(*6"5':$<(5:/$*(.*%.6*($%&69'#"?*6('%(/*"#=0(5'"'*5('%(=&0($"#52((3:'4(*6"5':$(9*-"/9<("#*"()(:/('4*(7:8&#*E:66(=*(?*#0(5-"66<(5%('4*("99:':%/"6('";(:5(6*55(6:Q*60('%(:/$#*"5*(8%?*#/-*/'#*?*/&*2((N*E(c*#5*0($%&69('#0('%(#*9&$*('4*(*6"5':$:'0(%7(9*-"/9(=0(#*F&:#:/8.*%.6*('%(."0(5"6*5('";('%(N*E(c*#5*0(E4*/('4*0(=&0("($"#(%&'5:9*('4*(5'"'*2
Pric
e
Quantity
Supply
Demand
Q1 Q2
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Ps
PB
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!"#$%&#'()#"$*(+(,%-."/08-8
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Tax
Rev
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0 300T
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=2 N%E(H(:5('4*(.#:$*(#*$*:?*9(=0(5*66*#5("/9(HJ>(:5('4*(.#:$*(.":9(=0(=&0*#52(LF&"':/8(F&"/':'0(9*-"/9*9('%(F&"/':'0(5&..6:*9(8:?*5(AH(M(OYY(D(aHJ>b2((I99:/8H('%(=%'4(5:9*5(%7('4*(*F&"':%/(8:?*5(OH(M(OYY(D(>2((K:?:9:/8(=%'4(5:9*5(=0(O(8:?*5H(M(1YY(D(>eO2((>4*/(HJ>(M(1YY(J(A>eO2((>4*(F&"/':'0(5%69(:5(/%E(G(M(AH(MAYY(D(A>eO2((>4*(.#:$*(#*$*:?*9(=0(5*66*#5(9*$6:/*5(7#%-(1YY('%(1YY(D(>eO2((>4*.#:$*(.":9(=0(=&0*#5(:/$#*"5*5(7#%-(1YY('%(1YY(J(A>eO2((>4*(F&"/':'0(5%699*$6:/*5(7#%-(AYY('%(AYY(D(A>eO2
$2 P:/$*('";(#*?*/&*(:5(>;G("/9(G(M(AYY(D(A>eO<('4*/('";(#*?*/&*(*F&"65(AYY(>(DA> eO2((B:8&#*(CDC(54%E5("(8#".4(%7('4:5(#*6"':%/54:.2((>";(#*?*/&*(:5(S*#%("'(>(MY("/9("'(>(M(OYY2
92 I5(B:8&#*(CD`(54%E5<('4*("#*"(%7('4*('#:"/86*(a6":9(%/(:'5(5:9*b('4"'(#*.#*5*/'5('4*9*"9E*:84'(6%55(:5(1eA(;(="5*(;(4*:84'<(E4*#*('4*(="5*(:5('4*($4"/8*(:/('4*(.#:$*<E4:$4(:5('4*(5:S*(%7('4*('";<(><("/9('4*(4*:84'(:5('4*("-%&/'(%7('4*(9*$6:/*(:/F&"/':'0<(E4:$4(:5(A>eO2((P%('4*(9*"9E*:84'(6%55(*F&"65(1eA(;(>(;(A>eO(M(> eO2(>4:5(#:5*5(*;.%/*/':"660(7#%-(Y(aE4*/(>(M(Yb('%(R\<YYY(E4*/(>(M(OYY<("5(54%E/:/(B:8&#*(CD1Y2
Pric
e
Quantity
Supply
Demand
200200 −
100 +
base = T height = 2T3
2T3
2T3
100 −100
T3
Dea
dwei
ght L
oss
0 300T
45,000
!"#$%&#'()#"$*(+(,%-."/08-10
*2 I('";(%7(UAYY(.*#(&/:'(:5("(="9(:9*"<(=*$"&5*(:'@5(:/("(#*8:%/(:/(E4:$4('";(#*?*/&*(:59*$6:/:/82((>4*(8%?*#/-*/'($%&69(#*9&$*('4*('";('%(U1\Y(.*#(&/:'<(8*'(-%#*('";(#*?*/&*aU1\<YYY(E4*/('4*('";(:5(U1\Y(?*#5&5(U1O<OOO(E4*/('4*('";(:5(UAYYb<("/9(#*9&$*('4*9*"9E*:84'(6%55(a^\YY(E4*/('4*('";(:5(U1\Y($%-."#*9('%(1O<OOO(E4*/('4*('";(:5(UAYYb2
Pric
e
Quantity
Domesticsupply
Domesticdemand
Worldprice
A
BC
DImports
PricebeforetradePriceaftertrade
!"#$%&#'()#"$*(+(,%-."/09-1
!"#$%&'()*((+$$,-.#%-/0*(10%&'0#%-/0#,(2'#3&
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12 34('5*(6%-*7'8$(.#8$*('5"'(.#*9"8:7(;8'5%&'(8/'*#/"'8%/":('#"6*(87("<%9*('5*(;%#:6(.#8$*='5*($%&/'#0(6%*7(/%'(5"9*("($%-."#"'89*("69"/'">*(8/(.#%6&$8/>('5*(>%%62((34('5*6%-*7'8$(.#8$*(87(<*:%;('5*(;%#:6(.#8$*=('5*($%&/'#0(5"7("($%-."#"'89*("69"/'">*(8/.#%6&$8/>('5*(>%%62((
?2 34("($%&/'#0(5"7("($%-."#"'89*("69"/'">*(8/(.#%6&$8/>("(>%%6=(8'(;8::(<*$%-*("/*@.%#'*#(;5*/('#"6*(87("::%;*62((34("($%&/'#0(6%*7(/%'(5"9*("($%-."#"'89*("69"/'">*(8/.#%6&$8/>("(>%%6=(8'(;8::(<*$%-*("/(8-.%#'*#(;5*/('#"6*(87("::%;*62(
A2 B8>&#*(CD1(8::&7'#"'*7(7&..:0("/6(6*-"/6(4%#("/(8-.%#'8/>($%&/'#02(()*4%#*('#"6*(87"::%;*6=($%/7&-*#(7&#.:&7(87("#*"(E("/6(.#%6&$*#(7&#.:&7(87("#*"()(F(,2((E4'*#('#"6*87("::%;*6=($%/7&-*#(7&#.:&7(87("#*"(E(F()(F(G("/6(.#%6&$*#(7&#.:&7(87("#*"(,2((H5*$5"/>*(8/('%'":(7&#.:&7(87("/(8/$#*"7*(<0("#*"(G2
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
Pric
e of
Ora
nges
Quantity of Oranges
Supply
Demand
Q1 QoQs
P1
Pw
A
B EC
D
!"#$%&#'()#"$*(+(,%-."/09-2
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;'/<,&=6(#03(+$$,-.#%-/06*((+06:&'6
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<2 W5*/('5*(X2Y2(%#"/>*(-"#S*'(87(%.*/*6('%('#"6*=('5*(/*;(*T&8:8<#8&-(.#8$*(87U =('5*(T&"/'8'0($%/7&-*6(87(V =('5*(T&"/'8'0(.#%6&$*6(6%-*7'8$"::0(87(V =("/6'5*(T&"/'8'0(8-.%#'*6(87(V (D(V 2((,%/7&-*#(7&#.:&7(8/$#*"7*7(4#%-(E('%(E(F()F(G(F(R2((U#%6&$*#(7&#.:&7(6*$#*"7*7(4#%-()(F(,('%(,2((H%'":(7&#.:&78/$#*"7*7(4#%-(E(F()(F(,('%(E(F()(F(,(F(G(F(R2
?2 "2 B8>&#*(CDA(8::&7'#"'*7('5*(X2Y2(-"#S*'(4%#(;8/*=(;5*#*('5*(;%#:6(.#8$*(%4(;8/*(87U 2((H5*(4%::%;8/>('"<:*(8::&7'#"'*7('5*(#*7&:'7(&/6*#('5*(5*"68/>(ZU 2Z
((((((((((; ( (((((; !>+?@A
!/065=&'(B5'$,56 (((EF)FGFR (((EFG ((DK)FRL
;'/35.&'(B5'$,56 ((((((((((, ((()F, (((((((((((((((F)
2/%#,(B5'$,56 EF)F,FGFR(((((EF)F,FG ((((((DR
Pric
e of
Win
eQuantity of Wine
Supply
Demand
P1
P2
A
B EC
D
!"#$%&#'()#"$*(+(,%-."/09-3
<2 H5*(7584'(8/('5*([&:4(Y'#*"-(6*7'#%07(7%-*(%4('5*(>#".*(5"#9*7'=(#"878/>('5*;%#:6(.#8$*(%4(;8/*('%(U 2((H5*('"<:*(75%;7('5*(*44*$'7(%/($%/7&-*#=(.#%6&$*#="/6('%'":(7&#.:&7=(&/6*#('5*(5*"68/>(ZU Z("/6('5*($5"/>*(8/('5*(7&#.:&7(-*"7&#*7&/6*#('5*(5*"68/>(Z,!E\[R2Z((,%/7&-*#7(:%7*=(.#%6&$*#7(;8/=("/6('5*X/8'*6(Y'"'*7("7("(;5%:*(87(;%#7*(%442
A2 B8>&#*(CDI(75%;7('5*(-"#S*'(4%#($%''%/(8/($%&/'#8*7(E("/6()2((\%'*('5"'('5*(;%#:6(.#8$*%4($%''%/(87('5*(7"-*(8/(<%'5($%&/'#8*72((,%&/'#0(E(8-.%#'7($%''%/(4#%-($%&/'#0()2(H5*('"<:*(<*:%;(75%;7('5"'('%'":(7&#.:&7(87(58>5*#(8/(<%'5($%&/'#8*72((!%;*9*#=(8/$%&/'#0(E=($%/7&-*#7("#*(<*''*#(%44("/6(.#%6&$*#7("#*(;%#7*(%44=(;58:*(8/($%&/'#0()=$%/7&-*#7("#*(;%#7*(%44("/6(.#%6&$*#7("#*(<*''*#(%442
((((((((CDE( (((?AF !>+?@A
!/50%'G(+
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;'/35.&'(B5'$,56 ((((((((GFR ((((((R ((((((DG
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;'/35.&'(B5'$,56 ((((((((((3 ((!F3F] (FK!F]L
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pA
Country A Country BQA QB
P1
Pw
pB
P2
SA
SB
DA DB
E
GCD F
H JI
Pric
e
Quantity
Supply
Demand
Pw
P1
Pw+t
!"#$%&#'()#"$*(+(,%-."/09-4
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Pric
e of
Aut
os
Quantity of Autos
Supply
A
C
GD E
BF
Demand
Pw
Pw+t
Q1s Q2
s Q2D Q1
D
!"#$%&#'()#"$*(+(,%-."/09-5
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((((((((CDE( ((((((((((?AF ((((((!>+?@A
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@/9&'0=&0% (((((((((a (((((((((((((R ((((((((((((((((((((((FR
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!"#$%&#'()#"$*(+(,%-."/09-6
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<2 ,%/786*#8/>(<%'5(-"#S*'7('%>*'5*#=(\EBHE(-"S*7(;5*"'(4"#-*#7(;%#7*(%44("/6$%#/(4"#-*#7(<*''*#(%44=(7%(8'(87/P'($:*"#(;5*'5*#(4"#-*#7("7("(;5%:*(>"8/(%#(:%7*2(Y8-8:"#:0=($%/7&-*#7(%4(;5*"'(>"8/(K78/$*('5*(.#8$*(%4(;5*"'(;8::(6*$:8/*L("/6$%/7&-*#7(%4($%#/(:%7*(K78/$*('5*(.#8$*(%4($%#/(;8::(#87*L=(7%($%/7&-*#7("7(";5%:*(-"0(*8'5*#(>"8/(%#(:%7*2((!%;*9*#=(;*(S/%;('5"'('5*('%'":(>"8/7(4#%-'#"6*("#*(.%78'89*=(7%('5*(X/8'*6(Y'"'*7("7("(;5%:*(87(<*''*#(%442
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<2 34('#"6*(87(%.*/*6=(T&"/'8'0(6*-"/6*6(8/(<%'5($%&/'#8*7(*T&":7(T&"/'8'0(7&..:8*68/(<%'5($%&/'#8*7("'("(.#8$*(%4(cAa2((H5*(X2Y2(.#8$*(6*$:8/*7("/6('5*(Y;877(.#8$*#87*72
$2 H5*('%'":(T&"/'8'0(%4(;"'$5*7(.#%6&$*6(8/(<%'5($%&/'#8*7(87(1aQ('5%&7"/62((H5*X/8'*6(Y'"'*7(.#%6&$*7(Ia('5%&7"/6("/6(Y;8'O*#:"/6(.#%6&$*7(^Q('5%&7"/62((H5*X/8'*6(Y'"'*7($%/7&-*7(ba('5%&7"/6(;"'$5*7("/6(Y;8'O*#:"/6($%/7&-*7(AQ'5%&7"/6=(7%(Y;8'O*#:"/6(*@.%#'7(Aa('5%&7"/6('%('5*(X/8'*6(Y'"'*72
62 H5*(X2Y2(;"'$5(8/6&7'#0($%/'#"$'7=(7%(*-.:%0-*/'(6*$:8/*72((H5*(Y;877(;"'$58/6&7'#0(*@."/67=(7%(*-.:%0-*/'(#87*72((X2Y2(.#%6&$*#7("/6(Y;877($%/7&-*#7:%7*(;58:*(X2Y2($%/7&-*#7("/6(Y;877(.#%6&$*#7(>"8/2((_9*#"::=('5*#*(87("(>"8/4#%-('#"6*2
d2 H5*('"@(%/(;8/*(4#%-(,":84%#/8"(87(M&7'(:8S*("('"#844(8-.%7*6(<0(%/*($%&/'#0(%/(8-.%#'74#%-("/%'5*#2((E7("(#*7&:'=(W"758/>'%/(.#%6&$*#7(;%&:6(<*(<*''*#(%44("/6(W"758/>'%/$%/7&-*#7(;%&:6(<*(;%#7*(%442((H5*(58>5*#(.#8$*(%4(;8/*(8/(W"758/>'%/(-*"/7.#%6&$*#7(;%&:6(.#%6&$*(-%#*(;8/*=(7%('5*0(;%&:6(58#*(-%#*(;%#S*#72((H"@(#*9*/&*;%&:6(>%('%('5*(>%9*#/-*/'(%4(W"758/>'%/2((Y%(<%'5($:"8-7("#*('#&*=(<&'(8'P7(<"6.%:8$0(<*$"&7*('5*(:%77*7('%(W"758/>'%/($%/7&-*#7(*@$**6('5*(>"8/7('%(.#%6&$*#72
Pric
e of
Sug
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Quantity of Sugar
S + quota
S
A
C
G
D E′ E″
B
F
Demand
Pw
Pq
Q1s
Q1s + quota
Q2s Q1
DQ2D
!"#$%&#'()#"$*(+(,%-."/09-7
C2 Y*/"'%#(!%::8/>7(87($%##*$'('5"'('5*(.#8$*(%4($:%'58/>(87('5*(;%#:6(.#8$*2(()&'('5"'(.#8$*87(:%;*#('5"/(8'(;%&:6(<*(8/('5*("<7*/$*(%4('#"6*=(7%($%/7&-*#(7&#.:&7(87(58>5*#('5"/(8';%&:6(<*(;8'5%&'('#"6*2((H5&7($%/7&-*#7(!"(<*/*48'(4#%-(:%;*#D.#8$*6(8-.%#'72
1a2 Y*::8/>('5*(:8$*/7*7("'("&$'8%/(87('5*(.%:8$0(;8'5('5*(:%;*7'(6*"6;*8>5'(:%77=(78/$*('5*:8$*/7*7(>%('%('5%7*(;5%(9":&*('5*-('5*(-%7'2((3/("668'8%/=('5*(>%9*#/-*/'(>*'7#*9*/&*(4#%-(7*::8/>('5*(:8$*/7*7=(7%(8'($"/(#*6&$*('"@*7(*:7*;5*#*=(:%;*#8/>6*"6;*8>5'(:%77(4#%-(%'5*#('"@*72((H5*(:"#>*7'(6*"6;*8>5'(:%77(.#%<"<:0(>%*7('%('5*.%:8$0(%4(;"8'8/>(8/(:8/*(4%#('5*(:8$*/7*7=(78/$*(.*%.:*(8/$&#('5*(:%77(%4('8-*(8/(;"8'8/>=;58$5(87("(6*"6;*8>5'(:%772((34(.*%.:*($"/('5*/(7*::('5*(:8$*/7*7=('5*0P::(>%('%('5%7*(;5%9":&*('5*-(-%7'(58>5:0N(5%;*9*#=('5*(>%9*#/-*/'(;8::(>*'(/%(#*9*/&*=(7%($"/P'(#*6&$*'"@*7(*:7*;5*#*2((H5*(.%:8$0(;8'5('5*(-866:*("-%&/'(%4(6*"6;*8>5'(:%77(87('5*(.%:8$0(%4687'#8<&'8/>(:8$*/7*7(#"/6%-:02((3'(6%*7/P'(5"9*('5*(6*"6;*8>5'(:%77("77%$8"'*6(;8'5.*%.:*(7'"/68/>(8/(:8/*=(<&'(6%*7/P'(#"87*(#*9*/&*(:8S*('5*(.%:8$0(%4(7*::8/>('5*(:8$*/7*72
112 "2 B8>&#*(CDb(8::&7'#"'*7('5*(*44*$'7(%4("(T&%'"(8/('5*(X2Y2(7&>"#(-"#S*'2((H5*6%-*7'8$(7&..:0($	*(87(6*/%'*6(Y2(()*4%#*('5*(T&%'"=('5*('%'":(7&..:0($	*(87":%/>($	*(Y(4%#(T&"/'8'8*7(4#%-(a('%(V ("/6(87(5%#8O%/'":("'(U =('5*(;%#:6.#8$*(%4(7&>"#=(4%#(58>5*#(T&"/'8'8*7=(#*.#*7*/'8/>(8-.%#'7(%4(7&>"#2((H5*(#*7&:'87('5"'('5*(*T&8:8<#8&-(T&"/'8'0(7&..:8*6(87(V =('5*(*T&8:8<#8&-(T&"/'8'06*-"/6*6(87(V =(8-.%#'7("#*(V (D(V =("/6('5*(.#8$*(87(U 2((
W5*/('5*(T&%'"(87(8/'#%6&$*6=('5*('%'":(7&..:0($	*(87('5*(7"-*("7(;8'5%&'('5*T&%'"(&.('%('5*(T&"/'8'0(V (F(T&%'"=('5*/(4%::%;7('5*($	*(Y(F(T&%'"(4%#58>5*#(T&"/'8'8*72(((H5*(T&%'"(:8-8'7('5*(T&"/'8'0(%4(8-.%#'7(%4(7&>"#=(:*"68/>('%*T&8:8<#8&-("'(.#8$*(U 2((H5*(#*7&:'(87('5"'('5*(*T&8:8<#8&-(T&"/'8'0(7&..:8*6(87V =('5*(*T&8:8<#8&-(T&"/'8'0(6*-"/6*6(87(V =("/6(8-.%#'7("#*(V (D(V 2
!"#$%&#'()#"$*(+(,%-."/09-8
<2 H5*(4%::%;8/>('"<:*(8::&7'#"'*7('5*(*44*$'7(%/(;*:4"#*(%4('5*(T&%'"(%/(7&>"#2((H5*>"8/7('%(:8$*/7*(5%:6*#7(-"0("$$#&*('%(.#89"'*(."#'8*7(84('5*(>%9*#/-*/'(>89*7('5*T&%'"(:8$*/7*7(";"0=(%#('%('5*(>%9*#/-*/'(84('5*(:8$*/7*7("#*(7%:62
((F-%"/5%(I5/%#(((((((((((((((((((F-%"(I5/%# ((((((((((((!"#0J&
!/065=&'(B5'$,56(EF)F,FGFRPFRZFB ((((((EF) (DK,FGFRPFRZFBL
;'/35.&'(B5'$,56 (((((((((((([ (((((((((((((((((((((((((((,F[ ((((F,
D-.&06&(>/,3&'6 ((a ((((((((((((((((RPFRZ ((((((((((FRPFRZ
2/%#,(B5'$,56(((((((EF)F,FGFRPFRZFBF[((EF)F,FRPFRZF[((DKGFBL
$2 ["8/7("/6(:%77*7(8/(%'5*#($%&/'#8*7($%&:6(<*(8-.%#'"/'=(78/$*(;*($"/('#"6*(>"8/7"$#%77($%&/'#8*7('%(8-.#%9*('5*(;*:4"#*(%4(*9*#0%/*2((3/("668'8%/=(8'(87/P'($:*"#'5"'(;*(75%&:6(<*(8/($&''5#%"'($%-.*'8'8%/(;8'5(%'5*#($%&/'#8*7N(;*(-"0($"#*"<%&'(.*%.:*('5#%&>5%&'('5*(;%#:62
62 H5*(58>5*#(7&>"#(.#8$*7($"&7*6(<0('5*(T&%'"(707'*-(5"9*(5"6("/(8-."$'(%/('5*4#&$'%7*(70#&.(8/6&7'#0(78/$*(4#&$'%7*(87("(7&<7'8'&'*(4%#(7&>"#2((W8'5("(58>5*#7&>"#(.#8$*=(.*%.:*(7&<7'8'&'*(4#&$'%7*(4%#(7&>"#=(7%('5*(4#&$'%7*(8/6&7'#0*@."/672
1?2 E/(*@.%#'(7&<7860(8/$#*"7*7('5*(.#8$*(%4(7'**:(*@.%#'7(#*$*89*6(<0(.#%6&$*#7(<0('5*"-%&/'(%4('5*(7&<7860=(7=("7(75%;/(8/(B8>&#*(CDd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
Pric
e of
Ste
el
Quantity of Steel
Supply
ACG
D
E
B
F
Demand
Pw
Pw+s
Q1s Q2
sQ1D
!"#$%&#'()#"$*(+(,%-."/09-9
7'**:($%/7&-*6(87(&/$5"/>*6=("/6('5*(T&"/'8'0(%4(7'**:(*@.%#'*6(8/$#*"7*72((E7('5*4%::%;8/>('"<:*(75%;7=($%/7&-*#(7&#.:&7(87(&/"44*$'*6=(.#%6&$*#(7&#.:&7(#87*7=>%9*#/-*/'(#*9*/&*(6*$:8/*7=("/6('%'":(7&#.:&7(6*$:8/*72
(((((((F-%"/5%(65<6-3G( ((((F-%"(65<6-3G !"#0J&
!/065=&'(B5'$,56 ((((EF) ((((((((((((((((((((EF) ( (((((a
;'/35.&'(B5'$,56 ((((((((((((((RFBF[ (((((((((((()F,FRFBF[((((FK)F,L
@/9&'0=&0%(8&9&05& (((((((a (((((( (((DK)F,FGL ((((((((DK)F,FGL
2/%#,(B5'$,56(((((((((((((((((((((EF)FRFBF[(((((((EF)DGFRFBF[ ((((DG
Pric
e
QuantityQoptimum Qmarket
Social cost
Supply(private cost)
Demand(private value)
!"#$%&#'()#"$*(+(,%-."/010-1
!"#$%&'()*+((,-%&'.#/0%0&1
23&1%04.1(54'(6&70&8+((9.18&'1
12 345&#*(1671(488&9'#"'*9(':*(*;;*$'(%;("(/*5"'4<*(*='*#/"84'0(4/(.#%>&$'4%/2((?:**@&484A#4&-(@&"/'4'0(.#%<4>*>(A0(':*(-"#B*'(49(C 2(()*$"&9*(%;(':*(*='*#/"84'0D(':*9%$4"8($%9'(%;(.#%>&$'4%/(49(5#*"'*#(':"/(':*(.#4<"'*($%9'(%;(.#%>&$'4%/D(9%(':*(9%$4"87$%9'$&#<*(49("A%<*(':*(9&..80($&#<*2((?:*(%.'4-"8(@&"/'4'0(;%#(9%$4*'0(49(C 2((?:*.#4<"'*(-"#B*'(.#%>&$*9('%%(-&$:(%;(':*(5%%>D("9(C (49(5#*"'*#(':"/(C 2
E2 F='*#/"84'4*9($"/(A*(9%8<*>(G4':%&'(5%<*#/-*/'(4/'*#<*/'4%/(':#%&5:(-%#"8($%>*9("/>9%$4"8(9"/$'4%/9(HG:4$:('*88(&9('%(4/'*#/"84I*(*='*#/"84'4*9D(9&$:("9(/%'('%(84''*#JD($:"#4'4*9H>%/"'4%/9('%(%#5"/4I"'4%/9(84B*(':*(K4*##"(,8&A('%(.#%'*$'(':*(*/<4#%/-*/'(%#('%&/4<*#94'4*9('%(9&..%#'(*>&$"'4%/JD(-*#54/5(;4#-9(G:%9*(*='*#/"84'4*9(";;*$'(*"$:(%':*#H;%#(*="-.8*D(':*("..8*(5#%G*#("/>(':*(A**B**.*#JD(%#(A0($%/'#"$'2
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
!"#$%&#'()#"$*(+(,%-."/010-2
O2 F$%/%-49'9(.#*;*#(P45%<4"/('"=*9(%<*#(#*5&8"'4%/9("9("(G"0('%(.#%'*$'(':*(*/<4#%/-*/';#%-(.%88&'4%/(A*$"&9*(':*0($"/(#*>&$*(.%88&'4%/("'("(8%G*#($%9'('%(9%$4*'02((M('"=($"/A*(9*'('%(#*>&$*(.%88&'4%/('%(':*(9"-*(8*<*8("9("(#*5&8"'4%/2((?:*('"=(:"9(':*("><"/'"5*%;(8*''4/5(':*(-"#B*'(>*'*#-4/*(':*(8*"9'(*=.*/94<*(G"0('%(#*>&$*(.%88&'4%/2((?:*('"=54<*9(;4#-9(4/$*/'4<*('%(>*<*8%.($8*"/*#('*$:/%8%54*9D(94/$*(>%4/5(9%(#*>&$*9(':*('"=*9':*0(:"<*('%(."02
:'4;/&<1(#.=(9$$/0>#%04.1+((9.18&'1
12 "2 ?:*(9'"'*-*/'D(Q?:*(A*/*;4'9(%;(P45%<4"/('"=*9("9("(G"0('%(#*>&$*(.%88&'4%/:"<*('%(A*(G*45:*>("5"4/9'(':*(>*">G*45:'(8%99*9(':"'(':*9*('"=*9($"&9*DQ(49;"89*2((N/(;"$'D(P45%<4"/('"=*9(#*>&$*(':*(4/*;;4$4*/$0(%;(.%88&'4%/(A0(#*>&$4/5':*(@&"/'4'0(%;(':*(5%%>(A*4/5(.#%>&$*>(':"'(:"9(.%88&'4%/("9("(A07.#%>&$'2((K%DP45%<4"/('"=*9(#*>&$*(>*">G*45:'(8%99D(':*0(>%/R'(4/$#*"9*(4'2
A2 ?:*(9'"'*-*/'D(QM(/*5"'4<*(.#%>&$'4%/(*='*#/"84'0($"889(;%#("(P45%<4"/('"=(%/.#%>&$*#9D(G:*#*"9("(/*5"'4<*($%/9&-.'4%/(*='*#/"84'0($"889(;%#("(P45%<4"/('"=%/($%/9&-*#9DQ(49(4/"$$&#"'*2((N'(>%*9/R'(-"''*#(%/(G:%-(':*('"=(49(4-.%9*>77':*4/$4>*/$*(%;(':*('"=(G488(A*(4>*/'4$"82((K%(G:*':*#(':*(*='*#/"84'0(49(;#%-.#%>&$'4%/(%#($%/9&-.'4%/(%;(':*(5%%>D("('"=(%/(*4':*#(.#%>&$*#9(%#($%/9&-*#9G488(8*">('%(':*(9"-*(#*>&$'4%/(%;(@&"/'4'0("/>($:"/5*(4/(':*(.#4$*9(.#%>&$*#9#*$*4<*(%#($%/9&-*#9(."02
E2 "2 34#*(*='4/5&49:*#9(*=:4A4'(.%94'4<*(*='*#/"84'4*9(4/($%/9&-.'4%/(A*$"&9*(*<*/':%&5:(.*%.8*(A&0(':*-(;%#(':*4#(%G/(&9*D(':*0(.#*<*/'(;4#*(;#%-(>"-"54/5(':*.#%.*#'0(%;(%':*#92((
A2 345&#*(167E(488&9'#"'*9(':*(.%94'4<*(*='*#/"84'0(;#%-(;4#*(*='4/5&49:*#92((S%'4$*':"'(':*(9%$4"8(<"8&*($&#<*(49("A%<*(':*(>*-"/>($&#<*2
$2 ?:*(-"#B*'(*@&484A#4&-(8*<*8(49(>*/%'*>(C ("/>(':*(*;;4$4*/'(8*<*8(%;(%&'.&'49(>*/%'*>(C 2((?:*(@&"/'4'4*9(>4;;*#(A*$"&9*(4/(>*$4>4/5('%(A&0(;4#**='4/5&49:*#9D(.*%.8*(>%/R'("$$%&/'(;%#(':*(A*/*;4'9(':*0(.#%<4>*('%(%':*#.*%.8*2
>2 M(5%<*#/-*/'(.%84$0(':"'(G%&8>(#*9&8'(4/(':*(*;;4$4*/'(%&'$%-*(G%&8>(A*('%9&A94>4I*(.*%.8*(T16(;%#(*<*#0(;4#*(*='4/5&49:*#(':*0(A&02
Pric
e of
Fire
Ext
ingu
ishe
rs
Quantity of Fire ExtinguishersQoptimumQmarket
Demand
Supply(social cost)
Social value
!"#$%&#'()#"$*(+(,%-."/010-3
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
O2 N;(':*(KG499(5%<*#/-*/'(9&A94>4I*9($"''8*(;"#-4/5D(4'(-&9'(A*(A*$"&9*(':*#*("#**='*#/"84'4*9("99%$4"'*>(G4':(4'2((K4/$*('%1'9($%-*('%(KG4'I*#8"/>('%(9**(':*(A*"&'4;&8$%&/'#094>*D(*/$%&#"54/5(;"#-9D("9(%..%9*>('%(4/>&9'#4"8(>*<*8%.-*/'D(49(4-.%#'"/'('%-"4/'"4/4/5(':*('%1'(4/>&9'#02((?:&9(;"#-9(.#%>&$*("(.%94'4<*(*='*#/"84'0(A0(B**.4/5':*(8"/>(A*"&'4;&8("/>(&/9.%48*>(A0(>*<*8%.-*/'2((?:*(5%<*#/-*/'R9(9&A94>0(':&9(:*8.9':*(-"#B*'(.#%<4>*(':*(%.'4-"8("-%&/'(%;(;"#-92
U2 345&#*(167L(9:%G9("(94'&"'4%/(4/(G:4$:(9'&>>*>(9/%G('4#*9(9:%&8>(A*(A"//*>$%-.8*'*802((?:*(>*-"/>($&#<*(4/'*#9*$'9(':*(9&..80($&#<*("'("(.%94'4<*(@&"/'4'0DC 2(()&'(':*(>"-"5*('%(:45:G"09($"&9*>(A0(':*(9'&>>*>('4#*9(-*"/9(':*(9%$4"8<"8&*(%;(':*('4#*9(49(-&$:(8*99(':"/(':*(.#4<"'*(<"8&*(9:%G/(A0(':*(>*-"/>($&#<*2((M9':*(;45&#*(9:%G9D(4;(':*(9%$4"8(<"8&*($&#<*(>%*9/R'(4/'*#9*$'(':*(9&..80($&#<*D(':**;;4$4*/'(@&"/'4'0D(C D(49(I*#%2
Pric
e of
Stu
dded
Sno
w T
ires
Quantity of Studded Snow TiresQoptimum Qmarket
Demand
Supply
Social valuePr
ice
of S
tudd
ed S
now
Tire
s
Quantity of Studded Snow TiresQoptimum Qmarket
Demand
Supply
Social value
!"#$%&#'()#"$*(+(,%-."/010-4
345&#*(167O(488&9'#"'*9(':*(94'&"'4%/(4/(G:4$:(':*(&9*(%;(9'&>>*>(9/%G('4#*9(9:%&8>(A*#*>&$*>(;#%-(':*(;#**7-"#B*'(8*<*8D(A&'(/%'(A"//*>2((S%G(':*(9%$4"8(<"8&*($&#<*4/'*#9*$'9(':*(9&..80($&#<*("'("(@&"/'4'0D(C D(G:4$:(49(8*99(':"/(':*(;#**7-"#B*'@&"/'4'0D(C D(A&'(/%'(I*#%2
V2 "2 ?:*(*='*#/"8($%9'(%;(.#%>&$4/5("8&-4/&-($"/9("#49*9(;#%-(':*(.%88&'4%/5*/*#"'*>(4/(':*(.#%>&$'4%/(.#%$*992((?:*(*='*#/"8($%9'(%;(&94/5("8&-4/&-($"/9$%-*9(;#%-(':*(;"$'(':"'(':*0(>%/R'(>*$%-.%9*D(9%(':*0(8"9'("(8%/5('4-*(4/8"/>;48892
Pric
e of
Alu
min
um C
ans
Quantity of Aluminum CansQoptimum Qmarket
Demand
Supply
Social cost
Social value
Pric
e of
Alc
ohol
Quantity of AlcoholQoptimum Qmarket
Demand
Supply(social cost)
Social value
C
AB
!"#$%&#'()#"$*(+(,%-."/010-5
A2 345&#*(167U(488&9'#"'*9(':*(-"#B*'(;%#("8&-4/&-($"/92((?:*(@&"/'4'0(%;($"/9(':"'G488(A*(9%8>(4/(':*(;#**(-"#B*'(49(C D("/>(':*(*;;4$4*/'(@&"/'4'0(49(C 2
W2 "2 ?:*(-"#B*'(;%#("8$%:%8(49(9:%G/(4/(345&#*(167V2((?:*(9%$4"8(<"8&*($&#<*(49A*8%G(':*(>*-"/>($&#<*(A*$"&9*(%;(':*(*='*#/"84'0(;#%-(4/$#*"9*>(-%'%#(<*:4$8*"$$4>*/'9($"&9*>(A0(':%9*(G:%(>#4/B("/>(>#4<*2((?:*(;#**7-"#B*'(*@&484A#4&-8*<*8(%;(%&'.&'(49(C ("/>(':*(*;;4$4*/'(8*<*8(%;(%&'.&'(49(C 2
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Cos
ts
Quantity
Averagetotal cost
Marginalcost
!"#$%&#'()#"$*(+(,%-."/013-2
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12 "2(%..%#'&/6'0($%7'J(82("<*#"B*('%'"5($%7'J($2(:6C*>($%7'J(>2(<"#6"85*($%7'J(*2('%'"5($%7'J(:2(-"#B6/"5($%7'2
@2 "2 34*(%..%#'&/6'0($%7'(%:(7%-*'46/B(67(94"'(-&7'(8*(:%#B%/*('%("$?&6#*(6'2
82 34*(%..%#'&/6'0($%7'(%:(#&//6/B('4*(4"#>9"#*(7'%#*(67(ERRF=FFF=($%/767'6/B(%:ERFF=FFF('%(#*/'('4*(7'%#*("/>(8&0('4*(7'%$D("/>("(ERF=FFF(%..%#'&/6'0($%7'=76/$*(0%&#("&/'(9%&5>(?&6'(4*#(S%8("7("/("$$%&/'"/'('%(#&/('4*(7'%#*2((U6/$*('4*'%'"5(%..%#'&/6'0($%7'(%:(ERRF=FFF(*C$**>7(#*<*/&*(%:(ER1F=FFF=(0%&#("&/'74%&5>/;'(%.*/('4*(7'%#*=("7(4*#(.#%:6'(9%&5>(8*(/*B"'6<*MM74*(9%&5>(5%7*-%/*02
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Qua
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of F
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Hours Spent Fishing
3025201510
50
0 2 41 53
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Tota
l Cos
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Quantity of Fish
353025201510
50
0 20 4010 30
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Cos
ts
Quantity of Lemonade
300
250
200
150
100
50
0 10
Total cost
Average total costMarginal cost
1 4 72 5 83 968
!"#$%&#'()#"$*(+(,%-."/013-5
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82 34*(:%55%96/B('"85*(74%97('%'"5($%7'=("<*#"B*('%'"5($%7'=("/>(-"#B6/"5($%7'2(34*7*("#*(.5%''*>(6/(L6B&#*(1GMK2
!"#$%&#'()#"$*(+(,%-."/013-6
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[ W, L, 3, AL, AW, A3,F ((F @FF @FF ((MM ((MM ((MM1 (1F @FF @1F @FF (1F @1F@ (@F @FF @@F 1FF (1F 11FG (KF @FF @KF (ZZ2] (1G2G (YFK (YF @FF @YF (RF (@F (]FR 1ZF @FF GZF (KF (G@ (]@Z G@F @FF R@F (GG2G (RG2G (YZ2]] ZKF @FF YKF (@Y2Z (\12K 1@F
Cos
ts
Quantity of Juice
4035302520151050
0
Average variable costAverage total cost
Marginal cost
1 42 53 6
!"#$%&#'()#"$*(+(,%-."/013-7
\2 "2 34*(:%55%96/B('"85*(74%97("<*#"B*(<"#6"85*($%7'(OAW,P=("<*#"B*('%'"5($%7'OA3,P=("/>(-"#B6/"5($%7'(OI,P(:%#(*"$4(?&"/'6'02
[ W, 3, AW, A3, I,
F ((F ((GF ((MM ((MM1F
1 (1F ((KF (1F (KF1R
@ (@R ((RR (1@2R (@]2R@F
G (KR( ((]R (1R( (@R@R
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!"#$%&#'()#"$*(+(,%-."/013-8
1F2 34*(:%55%96/B('"85*(74%97(?&"/'6'0(O[P=('%'"5($%7'(O3,P=("/>("<*#"B*('%'"5($%7'(OA3,P:%#('4*('4#**(:6#-7N
((((L6#-(A ((((L6#-() ((((L6#-(,[ 3, A3, 3, A3, 3, A3,
1 (ZF ZF (11 11 (@1 @1@ (]F GR (@K 1@ (GK 1]G (YF @Z2] (G\ 1G (K\ 1Z2GK (\F @@2R (RZ 1K (ZZ 1Z2RR 1FF @F (]R 1R (YR 1]Z 11F 1Y2] (\Z 1Z 1FZ 1]2]] 1@F 1]21 11\ 1] 1@\ 1Y2K
L6#-(A(4"7(*$%/%-6*7(%:(7$"5*(76/$*("<*#"B*('%'"5($%7'(>*$56/*7("7(%&'.&'(6/$#*"7*72(L6#-()(4"7(>67*$%/%-6*7(%:(7$"5*(76/$*("<*#"B*('%'"5($%7'(#67*7("7(%&'.&'(#67*72L6#-(,(4"7(*$%/%-6*7(%:(7$"5*(:%#(%&'.&'(:#%-(1('%(G=('4*/(>67*$%/%-6*7(%:(7$"5*(:%#B#*"'*#(5*<*57(%:(%&'.&'2
Pric
e, C
osts
Marginal costAverage total cost
Average variable cost
Q*
Quantity
P*
!"#$%&#'()#"$*(+(,%-."/014-1
!"#$%&'()*+((,-'./(-0(!1.$&%-%-2&(3#'4&%/
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12 3($%-.*'4'45*(64#-(47("(64#-(4/("(-"#8*'(4/(9:4$:;((<1=(':*#*("#*(-"/0(>&0*#7("/?(-"/07*@@*#7(4/(':*(-"#8*'A(<B=(':*(C%%?7(%66*#*?(>0(':*(5"#4%&7(7*@@*#7("#*(@"#C*@0(':*(7"-*A"/?(<D=(&7&"@@0(64#-7($"/(6#**@0(*/'*#(%#(*E4'(':*(-"#8*'2
B2 F4C&#*(1GH1(7:%97(':*($%7'($*7(6%#("('0.4$"@(64#-2((F%#("(C45*/(.#4$*(<7&$:("7(I =J':*(@*5*@(%6(%&'.&'(':"'(-"E4-4K*7(.#%64'(47(':*(%&'.&'(9:*#*(-"#C4/"@($%7'(*L&"@7(.#4$*<M =J("7(@%/C("7(.#4$*(47(C#*"'*#(':"/("5*#"C*(5"#4">@*($%7'("'(':"'(.%4/'(<4/(':*(7:%#'#&/=J(%#(C#*"'*#(':"/("5*#"C*('%'"@($%7'(<4/(':*(@%/C(#&/=2
D2 3(64#-(94@@(7:&'(?%9/('*-.%#"#4@0(46(':*(#*5*/&*(4'(9%&@?(C*'(6#%-(.#%?&$4/C(47(@*77':"/(':*(5"#4">@*($%7'7(%6(.#%?&$'4%/2((N:47(%$$(46(.#4$*(47(@*77(':"/("5*#"C*(5"#4">@*$%7'2
G2 3(64#-(94@@(*E4'("(-"#8*'(46(':*(#*5*/&*(4'(9%&@?(C*'(46(4'(7'"0*?(4/(>&74/*77(47(@*77(':"/4'7('%'"@($%7'2((N:47(%$$(46(.#4$*(47(@*77(':"/("5*#"C*('%'"@($%7'2
O2 3(64#-P7(.#4$*(*L&"@7(-"#C4/"@($%7'(4/(>%':(':*(7:%#'(#&/("/?(':*(@%/C(#&/2((Q/(>%':(':*7:%#'(#&/("/?(':*(@%/C(#&/J(.#4$*(*L&"@7(-"#C4/"@(#*5*/&*2((N:*(64#-(7:%&@?(4/$#*"7*%&'.&'("7(@%/C("7(-"#C4/"@(#*5*/&*(*E$**?7(-"#C4/"@($%7'J("/?(#*?&$*(%&'.&'(46
!"#$%&#'()#"$*(+(,%-."/014-2
-"#C4/"@(#*5*/&*(47(@*77(':"/(-"#C4/"@($%7'2((I#%64'7("#*(-"E4-4K*?(9:*/(-"#C4/"@#*5*/&*(*L&"@7(-"#C4/"@($%7'2
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
;'1<=&./(#0>(:$$=-?#%-10/+((:0/9&'/
12 3($%-.*'4'45*(-"#8*'(47(%/*(4/(9:4$:;((<1=(':*#*("#*(-"/0(>&0*#7("/?(-"/0(7*@@*#7(4/':*(-"#8*'A(<B=(':*(C%%?7(%66*#*?(>0(':*(5"#4%&7(7*@@*#7("#*(@"#C*@0(':*(7"-*A("/?(<D=&7&"@@0(64#-7($"/(6#**@0(*/'*#(%#(*E4'(':*(-"#8*'2((T6(':*7*(C%%?7J(>%''@*?(9"'*#(47.#%>">@0(':*($@%7*7'('%("($%-.*'4'45*(-"#8*'2((N".(9"'*#(47("(/"'&#"@(-%/%.%@0(>*$"&7*':*#*P7(%/@0(%/*(7*@@*#2((,%@"("/?(>**#("#*/P'(.*#6*$'@0($%-.*'4'45*(>*$"&7*(*5*#0(>#"/?47(7@4C:'@0(?466*#*/'2
B2 U4/$*("(/*9($&7'%-*#(47(%66*#4/C('%(."0(VDWW(6%#(%/*(?%7*J(-"#C4/"@(#*5*/&*(>*'9**/BWW("/?(BW1(?%7*7(47(VDWW2((U%(9*(-&7'(64/?(%&'(46(-"#C4/"@($%7'(47(C#*"'*#(':"/(%#(@*77':"/(VDWW2((N%(?%(':47J($"@$&@"'*('%'"@($%7'(6%#(BWW(?%7*7("/?(BW1(?%7*7J("/?($"@$&@"'*':*(4/$#*"7*(4/('%'"@($%7'2((X&@'4.@04/C(L&"/'4'0(>0("5*#"C*('%'"@($%7'J(9*(64/?(':"'('%'"@$%7'(#47*7(6#%-(VGWJWWW('%(VGWJGW1J(7%(-"#C4/"@($%7'(47(VGW12((U%(0%&#(#%%--"'*7:%&@?(/%'(-"8*(':*("??4'4%/"@(?%7*2
D2 "2 Y*-*->*#4/C(':"'(.#4$*(*L&"@7(-"#C4/"@($%7'(4/(*L&4@4>#4&-J(9*(8/%9(':*-"#C4/"@($%7'(-&7'(>*(DW($*/'7J(74/$*(':"'P7(':*(.#4$*2
>2 N:*(4/?&7'#0(47(/%'(4/(@%/CH#&/(*L&4@4>#4&-(74/$*(.#4$*(*E$**?7("5*#"C*('%'"@$%7'2
G2 T/$*(0%&P5*(%#?*#*?(':*(?4//*#J(4'7($%7'(47(7&/8J(7%(4'(?%*7/P'(#*.#*7*/'("/(%..%#'&/4'0$%7'2((37("(#*7&@'J(':*($%7'(%6(':*(?4//*#(7:%&@?/P'(4/6@&*/$*(0%&#(?*$474%/(">%&'(7'&664/C0%*@62
O2 "2 F4C&#*(1GHB(7:%97(':*(7:%#'H#&/(*66*$'(%6(?*$@4/4/C(?*-"/?(6%#(>**62((N:*(7:46'%6(':*(4/?&7'#0(?*-"/?($*(6#%-(Z ('%(Z (#*?&$*7(':*(L&"/'4'0(6#%-(M ('%(M"/?(#*?&$*7(':*(.#4$*(6#%-(I ('%(I 2((N:47("66*$'7(':*(64#-J(#*?&$4/C(4'7(L&"/'4'06#%-(L ('%(L 2(()*6%#*(':*(?*$@4/*(4/(':*(.#4$*J(':*(64#-(9"7(-"84/C(K*#%(.#%64'7A"6'*#9"#?7J(.#%64'7("#*(/*C"'45*J("7("5*#"C*('%'"@($%7'(*E$**?7(.#4$*2
Pric
e
QuantityQuantity
Industry Firm
Supply Marginalcost
Averagetotalcost
Q2 q2Q1 q1
P1
D1D2
P2
Pric
e, C
osts
, Rev
enue
Pric
e
QuantityQuantity
Industry Firm
Marginalcost
Averagetotalcost
Q2Q3 q2Q1 q1
P1
D1
S1S3
D2
P2
Pric
e, C
osts
, Rev
enue
!"#$%&#'()#"$*(+(,%-."/014-3
>2 F4C&#*(1GHD(7:%97(':*(@%/CH#&/(*66*$'(%6(?*$@4/4/C(?*-"/?(6%#(>**62((U4/$*64#-7(9*#*(@%74/C(-%/*0(4/(':*(7:%#'(#&/J(7%-*(64#-7(@*"5*(':*(4/?&7'#02((N:477:46'7(':*(7&..@0($*(6#%-(U ('%(U 2((N:*(7:46'(%6(':*(7&..@0($*(47([&7'*/%&C:('%(4/$#*"7*(':*(.#4$*(>"$8('%(4'7(%#4C4/"@(@*5*@J(I 2((37("(#*7&@'J(4/?&7'#0%&'.&'(6"@@7(7'4@@(6&#':*#J('%(M 2((F%#(64#-7(':"'(#*-"4/(4/(':*(4/?&7'#0J(':*(#47*(4/':*(.#4$*('%(I (#*'&#/7(':*-('%(':*4#(%#4C4/"@(74'&"'4%/J(.#%?&$4/C(L&"/'4'0(L ("/?*"#/4/C(K*#%(.#%64'72
R2 F4C&#*(1GHG(7:%97(':"'("@':%&C:(:4C:(.#4$*7($"&7*("/(4/?&7'#0('%(*E."/?J(*/'#0(4/'%(':*4/?&7'#0(*5*/'&"@@0(#*'&#/7(.#4$*7('%(':*(.%4/'(%6(-4/4-&-("5*#"C*('%'"@($%7'2((Q/(':*64C&#*J(':*(4/?&7'#0(47(%#4C4/"@@0(4/(@%/CH#&/(*L&4@4>#4&-2((N:*(4/?&7'#0(.#%?&$*7(%&'.&'M J(9:*#*(7&..@0($*(U (4/'*#7*$'7(?*-"/?($*(Z J("/?(':*(.#4$*(47(I 2((3'(':47
Pric
e, C
osts
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enue
QuantityQuantity
IndustryFirm
Marginalcost Average
total cost
Q2 Q3q2 Q1q1
P1
D2
S1S3
D1
P2
Pric
e
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Pric
e, C
osts
QuantityQuantity
IndustryFirm
Q2Q3q2 q3 Q1q1
P1
S1
S2
S3MC2
MC1ATC2ATC1
P2
P3 Pric
e
Demand
Pric
e, C
osts
Quantityimports
Quantity
IndustryFirm
q2 Q1q1
Supply
Demand
$30$25
Pric
e
Marginalcost
Averagetotal cost
!"#$%&#'()#"$*(+(,%-."/014-5
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Pric
e, C
osts
Quantity of PretzelsQuantity of Pretzels
IndustryFirm
q2 800q2 1000q1q1
S2S1
Demand
P2ATC2
P1 Pric
e
Marginalcost
Averagetotal cost
!"#$%&#'()#"$*(+(,%-."/014-6
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b2 "2 F4C&#*(1GH_(7:%97(':*($&##*/'(*L&4@4>#4&-(4/(':*(-"#8*'(6%#(.#*'K*@72((N:*7&..@0($*J(U J(4/'*#7*$'7(':*(?*-"/?($*("'(.#4$*(I 2((S"$:(7'"/?(.#%?&$*7L&"/'4'0(L (%6(.#*'K*@7J(7%(':*('%'"@(/&->*#(%6(.#*'K*@7(.#%?&$*?(47(1JWWW(E(L 2(U'"/?7(*"#/(K*#%(.#%64'J(74/$*(.#4$*(*L&"@7("5*#"C*('%'"@($%7'2
>2 Q6(':*($4'0(C%5*#/-*/'(#*7'#4$'7(':*(/&->*#(%6(.#*'K*@(7'"/?7('%(`WWJ(':*(4/?&7'#07&..@0($*(7:46'7('%(U 2((N:*(-"#8*'(.#4$*(#47*7('%(I J("/?(4/?454?&"@(64#-7.#%?&$*(%&'.&'(L 2((Q/?&7'#0(%&'.&'(47(/%9(`WW(E(L 2((\%9(':*(.#4$*(*E$**?7"5*#"C*('%'"@($%7'J(7%(*"$:(64#-(47(-"84/C("(.%74'45*(.#%64'2((^4':%&'(#*7'#4$'4%/7%/(':*(-"#8*'J(':47(9%&@?(4/?&$*(%':*#(64#-7('%(*/'*#(':*(-"#8*'J(>&'(':*0($"/P'J74/$*(':*(C%5*#/-*/'(:"7(@4-4'*?(':*(/&->*#(%6(@4$*/7*72
$2 N:*($4'0($%&@?($:"#C*("(@4$*/7*(6**(6%#(':*(@4$*/7*72((U4/$*(4'P7("(@&-.H7&-(6**6%#(':*(@4$*/7*J(/%'(>"7*?(%/(':*(L&"/'4'0(%6(7"@*7J(7&$:("('"E(:"7(/%(*66*$'(%/-"#C4/"@($%7'J(7%(9%/P'("66*$'(':*(64#-P7(%&'.&'2((Q'(94@@J(:%9*5*#J(#*?&$*(':*64#-P7(.#%64'72((37(@%/C("7(':*(64#-(47(@*6'(94':("(K*#%(%#(.%74'45*(.#%64'J(4'(94@@$%/'4/&*('%(%.*#"'*2((U%(':*(@4$*/7*(6**(':"'(>#4/C7(':*(-%7'(-%/*0('%(':*($4'0(47'%($:"#C*(*"$:(64#-(':*("-%&/'(<I (H(3N, =L J(':*("-%&/'(%6(':*(64#-P7(.#%64'2
1W2 "2 F4C&#*(1GH`(4@@&7'#"'*7(':*(C%@?(-"#8*'(<4/?&7'#0=("/?("(#*.#*7*/'"'45*(C%@?(-4/*<64#-=2((N:*(?*-"/?($*J(Z J(4/'*#7*$'7(':*(7&..@0($*("'(4/?&7'#0(L&"/'4'0M ("/?(.#4$*(I 2((U4/$*(':*(4/?&7'#0(47(4/(@%/CH#&/(*L&4@4>#4&-J(':*(.#4$*(*L&"@7':*(-4/4-&-(.%4/'(%/(':*(#*.#*7*/'"'45*(64#-P7("5*#"C*('%'"@($%7'($*J(7%(':*64#-(.#%?&$*7(%&'.&'(L ("/?(-"8*7(K*#%(.#%64'2
Pric
e, C
osts
QuantityQuantity
IndustryFirm
q2 Q1 Q2q1
D2D1
Supply
P2P1 Pr
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Marginalcost Average
total cost
Pric
e, C
osts
QuantityQuantity
Other refinerCalifornia refiner
Q0Qc
P*
ATCc
MarginalcostMarginal
cost Averagetotal cost
Averagetotal cost
Pric
e, C
osts
!"#$%&#'()#"$*(+(,%-."/014-7
>2 N:*(4/$#*"7*(4/([*9*@#0(?*-"/?(@*"?7('%("/(4/$#*"7*(4/(':*(?*-"/?(6%#(C%@?J7:46'4/C(':*(?*-"/?($*('%(Z 2((Q/(':*(7:%#'(#&/J(':*(.#4$*(#47*7('%(I J(4/?&7'#0%&'.&'(#47*7('%(M J("/?(':*(#*.#*7*/'"'45*(64#-P7(%&'.&'(#47*7('%(L 2((U4/$*(.#4$*/%9(*E$**?7("5*#"C*('%'"@($%7'J(':*(#*.#*7*/'"'45*(64#-(/%9(*"#/7(.%74'45*.#%64'72
$2 U4/$*(C%@?(-4/*7("#*(*"#/4/C(.%74'45*(*$%/%-4$(.#%64'7J(%5*#('4-*(%':*#(64#-794@@(*/'*#(':*(4/?&7'#02((N:47(94@@(7:46'(':*(7&..@0($*('%(':*(#4C:'J(#*?&$4/C':*(.#4$*(>*@%9(I 2(()&'(4'P7(&/@48*@0(':"'(':*(.#4$*(94@@(6"@@("@@(':*(9"0(>"$8('%I J(74/$*(C%@?(47(4/(7:%#'(7&..@02((,%7'7(6%#(/*9(64#-7("#*(@48*@0('%(>*(:4C:*#':"/(6%#(%@?*#(64#-7J(74/$*(':*0P@@(:"5*('%(?47$%5*#(/*9(C%@?(7%&#$*72((U%(4'P7@48*@0(':"'(':*(@%/CH#&/(7&..@0($*(4/(':*(C%@?(4/?&7'#0(47(&.9"#?(7@%.4/C2(N:"'(-*"/7(':*(@%/CH#&/(*L&4@4>#4&-(.#4$*(94@@(>*(:4C:*#(':"/(4'(9"7(4/4'4"@@02
112 "2 F4C&#*(1GHb(7:%97($%7'($*7(6%#("(,"@46%#/4"(#*64/*#("/?("(/%/H,"@46%#/4"#*64/*#2((U4/$*(':*(,"@46%#/4"(#*64/*#(:"7("$$*77('%(@%9*#H$%7'(%4@J(4'7($%7'7("#*@%9*#2
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$2 c*7J(':*#*(47("(7&>74?0('%(,"@46%#/4"(#*64/*#7(':"'(47(/%'(."77*?(%/('%($%/7&-*#72(N:*(7&>74?0("$$%&/'7(6%#(':*(@%/CH#&/(.#%64'7(%6(':*(,"@46%#/4"(#*64/*#72((Q'("#47*774-.@0(>*$"&7*(':*(%4@($"/P'(>*(*E.%#'*?2
Pric
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Rev
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Marginal cost
Deadweightloss
Demand
Marginal revenueQcQm
Pm
Quantity
!"#$%&#'()#"$*(+(,%-."/015-1
!"#$%&'()*+((,-.-$-/0
12&3%4-.3(5-'(6&74&8+((9.38&'3
12 3/(*4"-.5*(%6("(7%8*#/-*/'9$#*"'*:(-%/%.%50($%-*;(6#%-('<*(*4=;'*/$*(%6(."'*/'("/:$%.0#=7<'(5">;2(()%'<("55%>(6=#-;(%#(=/:=8=:&"5;('%(?*(-%/%.%5=*;(6%#(*4'*/:*:(.*#=%:;%6('=-*@1A(0*"#;(6%#(."'*/';B(6%#*8*#(6%#($%.0#=7<';2(()&'('<=;(-%/%.%50(.%>*#(=;7%%:B(?*$"&;*(>='<%&'(='B(/%(%/*(>%&5:(>#='*("(?%%C(D?*$"&;*("/0%/*($%&5:(.#=/'$%.=*;(%6(='B(;%('<*("&'<%#(>%&5:(7*'(/%(=/$%-*E("/:(/%(6=#-(>%&5:(=/8*;'(=/(#*;*"#$<"/:(:*8*5%.-*/'('%(=/8*/'(/*>(.#%:&$';(%#(:#&7;(D;=/$*("/0(%'<*#($%-."/0($%&5:.#%:&$*(%#(;*55('<*-B("/:('<*(6=#-(>%&5:(7*'(/%(.#%6='(6#%-(=';(=/8*;'-*/'E2((((((
F2 3/(=/:&;'#0(=;("(/"'&#"5(-%/%.%50(><*/("(;=/75*(6=#-($"/(;&..50("(7%%:(%#(;*#8=$*('%"/(*/'=#*(-"#C*'("'("(;-"55*#($%;'('<"/($%&5:('>%(%#(-%#*(6=#-;2((3;("(-"#C*'(7#%>;(='-"0(*8%58*(6#%-("(/"'&#"5(-%/%.%50('%("($%-.*'='=8*(-"#C*'2
G2 3(-%/%.%5=;'H;(-"#7=/"5(#*8*/&*(=;(5*;;('<"/('<*(.#=$*(%6(=';(.#%:&$'(?*$"&;*I((D1E(=';:*-"/:($*(=;('<*(-"#C*'(:*-"/:($*B(;%(DFE('%(=/$#*";*('<*("-%&/'(;%5:B('<*-%/%.%5=;'(-&;'(5%>*#('<*(.#=$*(%6(=';(7%%:(6%#(*8*#0(&/='(='(;*55;B(;%(DGE('<=;($&'(=/.#=$*;(#*:&$*;(#*8*/&*(%/('<*(&/=';(='(>";("5#*":0(;*55=/72
J2 K=7&#*(1L91(;<%>;('<*(:*-"/:B(-"#7=/"59#*8*/&*B("/:(-"#7=/"59$%;'($*;(6%#("-%/%.%5=;'2((M<*(=/'*#;*$'=%/(%6('<*(-"#7=/"59#*8*/&*("/:(-"#7=/"59$%;'($*;:*'*#-=/*;('<*(.#%6='9-"4=-=N=/7(5*8*5(%6(%&'.&'B(O 2((M<*(:*-"/:($*('<*/(;<%>;'<*(.#%6='9-"4=-=N=/7(.#=$*B(P 2
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Pric
e, C
ost,
Rev
enue
Marginalcost
Deadweightloss
Demand
Averagetotal cost
QMCQATC
PATCPMC
Quantity
!"#$%&#'()#"$*(+(,%-."/015-3
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G2 K=7&#*(1L9F(=55&;'#"'*;("(/"'&#"5(-%/%.%5=;'(;*''=/7(.#=$*B(P B(*R&"5('%("8*#"7*('%'"5$%;'2((M<*(*R&=5=?#=&-(R&"/'='0(=;(O 2((Y"#7=/"5($%;'(.#=$=/7(>%&5:(0=*5:('<*(.#=$*P ("/:(R&"/'='0(O 2((Z=/$*(6%#(R&"/'='=*;(?*'>**/(O ("/:(O ('<*(?*/*6='('%$%/;&-*#;(D-*";&#*:(?0('<*(:*-"/:($*E(*4$**:;('<*($%;'(%6(.#%:&$'=%/(D-*";&#*:?0('<*(-"#7=/"5($%;'($*EB('<*(:*":>*=7<'(5%;;(6#%-(;*''=/7(.#=$*(*R&"5('%("8*#"7*'%'"5($%;'(=;('<*('#="/7&5"#("#*"(;<%>/(=/('<*(6=7&#*2
J2 Y"=5(:*5=8*#0(<";("/("5>"0;9:*$5=/=/7("8*#"7*9'%'"59$%;'($*B(;=/$*('<*#*("#*(5"#7*6=4*:($%;';(6%#(*R&=.-*/'2((M<*(-"#7=/"5($%;'(%6(:*5=8*#=/7("(5*''*#(=;(8*#0(;-"552(!%>*8*#B('<*($%;';("#*(<=7<*#(=/(=;%5"'*:(#&#"5("#*";('<"/('<*0("#*(=/(:*/;*50(.%.&5"'*:&#?"/("#*";B(;=/$*('#"/;.%#'"'=%/($%;';(:=66*#2((V8*#('=-*B(=/$#*";*:("&'%-"'=%/(<";#*:&$*:(-"#7=/"5($%;'("/:(=/$#*";*:(6=4*:($%;';B(;%('<*("8*#"7*9'%'"59$%;'($*(<";?*$%-*(;'**.*#("'(;-"55(R&"/'='=*;("/:(65"''*#("'(<=7<(R&"/'='=*;2
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
Pric
e, C
ost,
Rev
enue
Marginal costAverage cost
Q1 Q2
D2
D1MR2
MR1
P1
AC2AC1
P2
Quantity of Bottled Water
Pric
e, C
ost,
Rev
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Marginalcost
Demand
QC
PC
Quantity of Groceries
A
!"#$%&#'()#"$*(+(,%-."/015-4
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S2 "2 K=7&#*(1L9J(=55&;'#"'*;('<*(-"#C*'(6%#(7#%$*#=*;(><*/('<*#*("#*(-"/0($%-.*'=/7;&.*#-"#C*';(>='<($%/;'"/'(-"#7=/"5($%;'2((V&'.&'(=;(O B(.#=$*(=;(P B($%/;&-*#;&#.5&;(=;("#*"(3B(.#%:&$*#(;&#.5&;(=;(N*#%B("/:('%'"5(;&#.5&;(=;("#*"(32
Pric
e, C
ost,
Rev
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Marginalcost
Demand
QCQM
PC
PM
Quantity of Groceries
CB
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F
Marginalrevenue
!"#$%&#'()#"$*(+(,%-."/015-5
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A2 "2 M<*(6%55%>=/7('"?5*(;<%>;('%'"5(#*8*/&*("/:(-"#7=/"5(#*8*/&*(6%#(*"$<(.#=$*"/:(R&"/'='0(;%5:I
(((((((((((((((((((M%'"5 (((((((Y"#7=/"5 M%'"5(((((((((((P#=$*(((((O&"/'='0((((((\*8*/&*(((((((\*8*/&* ((((( ,%;'((((((((((((( P#%6='
FJ 1_B___ FJ_B___ L_B___ 1`_B___((((((((F__B___
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U2 M%('<*(*4'*/'('<"'(.*%.5*($"/(;&?;'='&'*(%'<*#($%-.&'*#;(6%#(-"=/6#"-*;B('<"'(>=55$%/;'#"=/(Q)YH;(-%/%.%50(.%>*#2((Z%('<*(7%8*#/-*/'(-=7<'(<"8*(5%%C*:("'('<*:*-"/:($*(6"$=/7(Q)YB(%#('<*(:=8*#7*/$*(?*'>**/(Q)YH;(.#=$*("/:(-"#7=/"5($%;'B'%(7*'(;%-*(=:*"(%6(<%>(;*8*#*('<*(-%/%.%50(.#%?5*-(>";2
`2 "2 M<*(6%55%>=/7('"?5*(;<%>;(#*8*/&*("/:(-"#7=/"5(#*8*/&*(6%#('<*(?#=:7*I
((((((Y"#7=/"5(((((((P#=$* (((((((O&"/'='0 (((((((\*8*/&* (((((((\*8*/&*
U (((_ (((((_(A__
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M<*(.#%6='9-"4=-=N=/7(.#=$*(>%&5:(?*(><*#*(#*8*/&*(=;(-"4=-=N*:B(><=$<(>=55%$$&#(><*#*(-"#7=/"5(#*8*/&*(*R&"5;(N*#%B(;=/$*(-"#7=/"5($%;'(*R&"5;(N*#%2(M<=;(%$$&#;("'("(.#=$*(%6(aJ("/:(R&"/'='0(%6(J__2((M<*(*66=$=*/'(5*8*5(%6(%&'.&'(=;U__B(;=/$*('<"'H;(><*#*(.#=$*(*R&"5;(-"#7=/"5($%;'(*R&"5;(N*#%2((M<*(.#%6='9-"4=-=N=/7(R&"/'='0(=;(5%>*#('<"/('<*(*66=$=*/'(R&"/'='0(?*$"&;*('<*(6=#-(=;("-%/%.%5=;'2
?2 M<*($%-."/0(;<%&5:/H'(?&=5:('<*(?#=:7*(?*$"&;*(=';(.#%6=';("#*(/*7"'=8*2((M<*-%;'(#*8*/&*(='($"/(*"#/(=;(a1BS__B___("/:('<*($%;'(=;(aFB___B___B(;%(='(>%&5:5%;*(aJ__B___2
Pric
e
Demand
800
8
Quantity of Crossings
Area= x 8 x 800= 3,200
12
Pric
e, C
ost,
Rev
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Average cost
Demand
Q1
AC1
P1
Quantity of Drug Bottles
Marginal revenue
!"#$%&#'()#"$*(+(,%-."/015-7
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:2 c*;B('<*(7%8*#/-*/'(;<%&5:(?&=5:('<*(?#=:7*B(?*$"&;*(='(>%&5:(=/$#*";*;%$=*'0H;('%'"5(;&#.5&;2((3;(;<%>/(=/(K=7&#*(1L9SB('%'"5(;&#.5&;(<";("#*"(1dF(4(U4(U__B___(e(aGBF__B___B(><=$<(*4$**:;('<*($%;'(%6(?&=5:=/7('<*(?#=:7*2
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Pric
e, C
ost,
Rev
enue
Marginal cost + tax
Average cost + tax
Demand
Q2
AC2
P2
Marginal revenue
!"#$%&#'()#"$*(+(,%-."/015-8
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$2 M<*('"4(:*6=/='*50(#*:&$*;(.#%6=';2((36'*#("55B('<*(6=#-($%&5:(<"8*(.#%:&$*:R&"/'='0(O ("'(.#=$*(P (?*6%#*('<*('"4(>";(=-.%;*:B(?&'(='(:=:/H'(-"4=-=N*.#%6=';2((Z%('<*(6=#-H;(#*8*/&*(5*;;($%;';("#*(5%>*#("6'*#('<*('"4(=;(=-.%;*:X(=/"::='=%/B('<*(6=#-(-&;'(."0('<*('"42
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Pric
e, C
ost,
Rev
enue Marginal cost
Average cost
Demand
QM QCQL
PLPC
PM
Quantity of DrinksMarginal revenue
Price
, Cos
t, Re
venu
e
Marginalcost
Demand
QCQM
PM
Quantity of Chips
C
BAD
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Marginalrevenue
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Price
, Cos
t, Re
venu
e
Marginal cost= Average cost
Demand
QCQM
PM
Quantity
XX
Y Y
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Marginalrevenue
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-%/%.%957'5$"990($%-.*'5'5G*(85#-(.#%?&$*7("(.#%?&$'('4"'(57(%/90(7%-*D4"'(?588*#*/'
8#%-(7&67'5'&'*(@%%?72((N%('4*(@%%?7(?588*#(5/('*#-7(%8('4*(?*@#**('%(D45$4(7&67'5'&'*7
*B57'2
Pric
e 1 C
ost 1
Rev
enue
Quantity of Sparkle ToothpasteQM QC
Demand
Averagetotal cost
C
BA
Marginalcost
PM
Marginal revenue
!"#$%&#'()#"$*(+(,%-."/0
17-3
A2 E%/%.%957'5$"990($%-.*'5'5G*(85#-7(?%/Q'(5/$#*"7*('4*(I&"/'5'0('4*0(.#%?&$*('%(9%D*#
'4*("G*#"@*($%7'(%8(.#%?&$'5%/(6*$"&7*(?%5/@(7%(D%&9?(#*I&5#*('4*-('%(9%D*#('4*5#
.#5$*2((34*(9%77(5/(#*G*/&*(8#%-('4*(9%D*#(.#5$*(%&'D*5@47('4*(6*/*85'7(%8('4*(9%D*#
$%7'(%8(.#%?&$'5%/2
O2 "2 K5@&#*(1LF>(599&7'#"'*7('4*(-"#C*'(8%#(N."#C9*('%%'4."7'*(5/(9%/@F#&/
*I&5956#5&-2((34*(.#%85'F-"B5-5J5/@(9*G*9(%8(%&'.&'(57(W ("/?('4*(.#5$*(57(M 2
62 N."#C9*Q7(.#%85'(57(J*#%H(75/$*("'(I&"/'5'0(W H(.#5$*(*I&"97("G*#"@*('%'"9($%7'2
$2 34*($%/7&-*#(7&#.9&7(8#%-('4*(.&#$4"7*(%8(N."#C9*('%%'4."7'*(57("#*"(PX)2(
34*(*885$5*/'(9*G*9(%8(%&'.&'(%$$(D4*#*('4*(?*-"/?($&#G*(5/'*#7*$'7('4*
-"#@5/"9F$%7'($&#G*H("'(W 2((N%('4*(?*"?D*5@4'(9%77(57("#*"(,H('4*("#*"("6%G*
-"#@5/"9($%7'("/?(6*9%D(?*-"/?H(8#%-(W ('%(W 2
?2 Y8('4*(@%G*#/-*/'(8%#$*?(N."#C9*('%(.#%?&$*('4*(*885$5*/'(9*G*9(%8(%&'.&'H('4*
85#-(D%&9?(9%7*(-%/*0(6*$"&7*("G*#"@*($%7'(D%&9?(*B$**?(.#5$*H(7%('4*(85#-
D%&9?(74&'(?%D/2((Y8('4"'(4"..*/*?H(N."#C9*Q7($&7'%-*#7(D%&9?(9%7*('4*5#
$%/7&-*#(7&#.9&72
R2 N5/$*(*"$4(85#-(5/("(-%/%.%957'5$"990($%-.*'5'5G*(-"#C*'(.#%?&$*7("(.#%?&$'('4"'Q7
795@4'90(?588*#*/'(8#%-(%'4*#(.#%?&$'7H("(-%/%.%957'5$"990($%-.*'5'5G*(-"#C*'(4"7("
9"#@*(/&-6*#(%8(.#%?&$'72(()&'(D4*'4*#('4"'(/&-6*#(57(%.'5-"9(%#(/%'(?*.*/?7(%/('D%
C*0(*B'*#/"95'5*7:(('4*(.#%?&$'FG"#5*'0(*B'*#/"95'0("/?('4*(6&75/*77F7'*"95/@(*B'*#/"95'02(
34*(.#%?&$'FG"#5*'0(*B'*#/"95'0(57("(.%75'5G*(*B'*#/"95'0('%($%/7&-*#7(8#%-('4*
5/'#%?&$'5%/(%8("(/*D(.#%?&$'2((34*(6&75/*77F7'*"95/@(*B'*#/"95'0(57("(/*@"'5G*
!"#$%&#'()#"$*(+(,%-."/0
17-4
*B'*#/"95'0(6*$"&7*(%'4*#(85#-7(9%7*($&7'%-*#7("/?(.#%85'7(8#%-('4*("??5'5%/(%8("(/*D
.#%?&$'2((N5/$*('4*(*/'#"/'(?%*7/Q'('"C*('4*7*(*B'*#/"95'5*7(5/'%("$$%&/'(5/(?*$5?5/@
D4*'4*#(%#(/%'('%(*/'*#('4*(-"#C*'H(5'(57/Q'($9*"#(D4*'4*#('4*("$'&"9(/&-6*#(%8(.#%?&$'7
D599(6*(%.'5-"9H("6%G*(%.'5-"9H(%#(6*9%D(%.'5-"92
S2 34*(8%99%D5/@('"69*(74%D7H(&/?*#('4*(-"#C*'(7'#&$'&#*7(957'*?(5/('4*($%9&-/(4*"?5/@7H
D4*'4*#(85#-7(?%('4*('45/@7(957'*?(5/(*"$4(#%D:
(((((E"#C*'(N'#&$'&#*
M*#8*$' E%/%.%957'5$ E%/%.%90
Z%(85#-7: ,%-.*'5'5%/ ,%-.*'5'5%/
-"C*(?588*#*/'5"'*? [\ ]^N ]^N
.#%?&$'7_
4"G*(*B$*77($"."$5'0_ [\ ]^N ]^N
"?G*#'57*_ [\ ]^N ]^N
.5$C(W(7%('4"'(E`aE,_ ]^N ]^N ]^N
.5$C(W(7%('4"'(.#5$*aE,_ ]^N [\ [\
*"#/(*$%/%-5$(.#%85'7 [\ [\ ]^N
5/(9%/@F#&/(*I&5956#5&-_
8"$*("(?%D/D"#?F79%.5/@ [\ ]^N ]^N
?*-"/?($&#G*_
4"G*(E`(9*77('4"/(.#5$*_ [\ ]^N ]^N
8"$*('4*(*/'#0( ]^N ]^N [\
%8(%'4*#(85#-7_
*B5'(5/('4*(9%/@(#&/(58( ]^N ]^N ]^N
.#%85'7("#*(9*77('4"/(J*#%_
L2 )0(7*/?5/@(,4#57'-"7($"#?7('%('4*5#($&7'%-*#7H(-%/%.%957'5$"990($%-.*'5'5G*(85#-7("#*
"?G*#'575/@('4*-7*9G*72((N5/$*('4*0Q#*(5/("(.%75'5%/(5/(D45$4(.#5$*(*B$**?7(-"#@5/"9
$%7'H('4*0Q?(95C*(-%#*($&7'%-*#7('%($%-*(5/H("7(74%D/(5/(K5@&#*(1LFA2((N5/$*('4*(.#5$*H
Pric
e 1 C
ost 1
Rev
enue
QuantityQM
Demand
Marginal cost
PM
MCM
Marginal revenue
!"#$%&#'()#"$*(+(,%-."/0
17-5
M H(*B$**?7(-"#@5/"9($%7'H(E, H("/0("??5'5%/"9($&7'%-*#(D4%(."07('4*(*B57'5/@(.#5$*
5/$#*"7*7('4*(85#-Q7(.#%85'72
b2 Y8(0%&(D*#*('45/C5/@(%8(*/'*#5/@('4*(5$*F$#*"-(6&75/*77H(0%&Q?(D"/'('%(-"C*(5$*($#*"-
'4"'(57(795@4'90(?588*#*/'(8#%-('4*(*B57'5/@(6#"/?72(()0(?588*#*/'5"'5/@(0%&#(.#%?&$'(8#%-
%'4*#7H(0%&(@"5/(7%-*(-"#C*'(.%D*#2
c2 E"/0("/7D*#7("#*(.%77569*2((34*("/7D*#7(74%&9?(*B.9"5/('4"'($%--*#$5"97("#*(7%$5"990
&7*8&9('%('4*(*B'*/'('4"'('4*0(.#%G5?*($%/7&-*#7(5/8%#-"'5%/("6%&'('4*(.#%?&$'(%#
?*-%/7'#"'*(8#%-('4*(*B57'*/$*(%8('4*($%--*#$5"9('4"'('4*(.#%?&$'(57(D%#'4("?G*#'575/@H
7%(57/Q'(%8(9%D(I&"95'02((34*0("#*(7%$5"990(D"7'*8&9('%('4*(*B'*/'('4"'('4*0(-"/5.&9"'*
.*%.9*Q7('"7'*7("/?('#0('%(-"C*(.#%?&$'7(7**-7(-%#*(?588*#*/'('4"/('4*0(#*"990("#*2
1d2 "2 P(8"-590F%D/*?(#*7'"&#"/'(D%&9?(6*(-%#*(95C*90('%("?G*#'57*('4"/("(8"-590F
%D/*?(8"#-(6*$"&7*('4*(%&'.&'(%8('4*(8"#-(57(7%9?(5/("($%-.*'5'5G*(-"#C*'H(5/
D45$4('4*#*Q7(/%(#*"7%/('%("?G*#'57*H(D459*('4*(%&'.&'(%8('4*(#*7'"&#"/'(57(7%9?(5/
"(-%/%.%957'5$"990($%-.*'5'5G*(-"#C*'2
62 P(-"/&8"$'&#*#(%8($"#7(57(-%#*(95C*90('%("?G*#'57*('4"/("(-"/&8"$'&#*#(%8(8%#CF
958'7(6*$"&7*('4*#*Q7(95''9*(?588*#*/$*(6*'D**/(?588*#*/'(6#"/?7(%8(5/?&7'#5"9
.#%?&$'7(95C*(8%#CF958'7H(D459*('4*#*("#*(@#*"'*#(.*#$*5G*?(?588*#*/$*7(6*'D**/
$%/7&-*#(.#%?&$'7(95C*($"#72
$2 P($%-."/0('4"'(5/G*/'*?("(#*95"69*(D"'$4(57(95C*90('%("?G*#'57*(-%#*('4"/("
$%-."/0('4"'(5/G*/'*?("(9*77(#*95"69*(D"'$4('4"'($%7'7('4*(7"-*("-%&/'('%(-"C*
6*$"&7*('4*($%-."/0(D5'4('4*(#*95"69*(D"'$4(D599(@*'(-"/0(#*.*"'(7"9*7(%G*#
Pric
e 1 C
ost 1
Rev
enue
Quantity of TylenolQT
Demand
Marginal cost
PT
MCT
Marginal revenue
!"#$%&#'()#"$*(+(,%-."/0
17-6
'5-*('%($%G*#('4*($%7'(%8('4*("?G*#'575/@H(D459*('4*($%-."/0(D5'4('4*(9*77
#*95"69*(D"'$4(D599(/%'2
112 "2 M*#?&*($#*"'*?("(6#"/?(/"-*(8%#($45$C*/(60("?G*#'575/@2(()0(?%5/@(7%H(4*(D"7
"69*('%(?588*#*/'5"'*(457(.#%?&$'(8#%-(%'4*#($45$C*/H(@"5/5/@(-"#C*'(.%D*#2
62 N%$5*'0(@"5/*?('%('4*(*B'*/'('4"'(M*#?&*(4"7("(@#*"'(5/$*/'5G*('%(-"5/'"5/('4*
I&"95'0(%8(457($45$C*/2((N%$5*'0(9%7'('%('4*(*B'*/'('4"'('4*(-"#C*'(8%#($45$C*/
6*$"-*(9*77($%-.*'5'5G*H(D5'4('4*("77%$5"'*?(?*"?D*5@4'(9%772
1>2 "2 K5@&#*(1LFO(74%D7(309*/%9Q7(?*-"/?H(-"#@5/"9(#*G*/&*H("/?(-"#@5/"9($%7'
$&#G*72((309*/%9Q7(.#5$*(57(M H(5'7(-"#@5/"9($%7'(57(E, H("/?(5'7(-"#C&.(%G*#
-"#@5/"9($%7'(57(M (F(E, 2
62 K5@&#*(1LFR(74%D7('4*(?*-"/?H(-"#@5/"9(#*G*/&*H("/?(-"#@5/"9($%7'($&#G*7(8%#
"(-"C*#(%8("$*'"-5/%.4*/2((34*(?5"@#"-7(?588*#(5/('4"'('4*("$*'"-5/%.4*/
-"C*#(8"$*7("(4%#5J%/'"9(?*-"/?($&#G*H(D459*('4*(-"C*#(%8(309*/%9(8"$*7("
?%D/D"#?F79%.5/@(?*-"/?($&#G*2((34*("$*'"-5/%.4*/(-"C*#(4"7(/%(-"#C&.(%8
.#5$*(%G*#(-"#@5/"9($%7'H(D459*('4*(-"C*#(%8(309*/%9(4"7("(.%75'5G*(-"#C&.H
6*$"&7*(5'(4"7(7%-*(-"#C*'(.%D*#2
Pric
e 1 C
ost 1
Rev
enue
Quantity of AcetaminophenQg
Marginal cost
Demand =Marginalrevenue
Pg = MCg
!"#$%&#'()#"$*(+(,%-."/0
17-7
$2 34*(-"C*#(%8(309*/%9(4"7("(65@@*#(5/$*/'5G*(8%#($"#*8&9(I&"95'0($%/'#%9H(6*$"&7*
58(I&"95'0(D*#*(.%%#H('4*(G"9&*(%8(5'7(6#"/?(/"-*(D%&9?(?*'*#5%#"'*H(7"9*7(D%&9?
?*$95/*H("/?(5'7("?G*#'575/@(D%&9?(6*(D%#'4(9*772
Price
of A
pple
s
Quantity of ApplesQ1 Q2
D2D1
Supply
P2
P1
!"#$%&#'()#"$*(+(,%-."/018-1
!"#$%&'()*+((,"&(-#'.&%/(01'(%"&(2#3%1'/(10(4'1563%718
96&/%718/(01'(:&;7&<+((=8/<&'/
123 4(56#-78(.#%9&$'6%/(5&/$'6%/(9*8$#6:*8(';*(#*<"'6%/8;6.(:*'=**/(';*(>&"/'6'0(%5(<":%#&8*9(6/(.#%9&$'6%/("/9(';*(>&"/'6'0(%5(%&'.&'(5#%-(.#%9&$'6%/2((?;*(-"#@6/"<(.#%9&$'%5(<":%#(68(';*(6/$#*"8*(6/(';*("-%&/'(%5(%&'.&'(5#%-("/("996'6%/"<(&/6'(%5(<":%#2((?;&8';*(-"#@6/"<(.#%9&$'(%5(<":%#(9*.*/98(96#*$'<0(%/(';*(.#%9&$'6%/(5&/$'6%/2
323 ?;*(A"<&*(%5(';*(-"#@6/"<(.#%9&$'(%5(<":%#(68(';*(-"#@6/"<(.#%9&$'(%5(<":%#(-&<'6.<6*9:0(';*(-"#B*'(.#6$*(%5(';*(%&'.&'2
C23 4($%-.*'6'6A*D(.#%56'E-"F6-6G6/@(56#-(;6#*8(=%#B*#8(&.('%(';*(.%6/'(=;*#*(';*(A"<&*(%5';*(-"#@6/"<(.#%9&$'(%5(<":%#(*>&"<8(';*(="@*2((48("(#*8&<'D(';*(A"<&*E%5E-"#@6/"<E.#%9&$'($&#A*(68(';*(<":%#E9*-"/9($&#A*2
H23 4(<"#@*(6--6@#"'6%/(=%&<9(6/$#*"8*(';*(8&..<0(%5(<":%#D(';&8(#*9&$6/@(';*(="@*2((I6';-%#*(<":%#(=%#B6/@(=6';($".6'"<("/9(<"/9D(';*(-"#@6/"<(.#%9&$'(%5($".6'"<("/9(<"/9(68;6@;*#D(8%(#*/'8(*"#/*9(:0(%=/*#8(%5(<"/9("/9($".6'"<(=%&<9(6/$#*"8*2
4'1>?&@/(#85(=$$?73#%718/+((=8/<&'/
123 "23 ?;*(<"=(#*>&6#6/@(.*%.<*('%(*"'(%/*("..<*("(9"0(6/$#*"8*8(';*(9*-"/9(5%#"..<*82((48(8;%=/(6/(J6@&#*(1KE1D(9*-"/9(8;65'8(5#%-(L ('%(L D(6/$#*"86/@(';*.#6$*(5#%-(M ('%(M D("/9(6/$#*"86/@(>&"/'6'0(5#%-(N ('%(N 2
Wag
e, V
alue
of M
argi
nal P
rodu
ct o
f Lab
or
Quantity of LaborL1 L2
D2
D1
Supply
w2
w1
!"#$%&#'()#"$*(+(,%-."/018-2
:2 O6/$*(';*(.#6$*(%5("..<*8(6/$#*"8*8D(';*(A"<&*(%5(-"#@6/"<(.#%9&$'(6/$#*"8*8(5%#"/0(@6A*/(>&"/'6'0(%5(<":%#2((?;*#*78(/%($;"/@*(6/(';*(-"#@6/"<(.#%9&$'(%5(<":%#5%#("/0(@6A*/(>&"/'6'0(%5(<":%#2((!%=*A*#D(86/$*(%&'.&'(6/$#*"8*8("8(56#-8(;6#*-%#*(<":%#D(';*(-"#@6/"<(.#%9&$'(%5(<":%#(9*$#*"8*82
$2 48(J6@&#*(1KE3(8;%=8D(';*(6/$#*"8*(6/(';*(A"<&*(%5(-"#@6/"<(.#%9&$'(%5(<":%#8;65'8(';*(9*-"/9($&#A*(%5(<":%#(5#%-(L ('%(L 2((?;*(*>&6<6:#6&-(>&"/'6'0(%5<":%#(#68*8(5#%-(P ('%(P D("/9(';*(="@*(#68*8(5#%-(= ('%(= 2
32 !*/#0(J%#9(-"9*(';*(8'"'*-*/'(';"'(QR'(68(/%'(';*(*-.<%0*#(=;%(."08(="@*8EE;*(%/<0;"/9<*8(';*(-%/*02((R'(68(';*(.#%9&$'(';"'(."08(="@*82Q((R/(';*(<"/@&"@*(%5(*$%/%-6$8D;*(-*"/8(';"'(';*(9*-"/9(5%#(<":%#(68("(9*#6A*9(9*-"/92((I"@*8(9*.*/9(%/(';*(.#6$*(%5';*(56/"<(.#%9&$'("/9(%/(';*(9*-"/9(5%#(';"'(.#%9&$'2
C2 "2 R5(,%/@#*88(=*#*('%(:&0(.*#8%/"<($%-.&'*#8(5%#("<<(4-*#6$"/($%<<*@*(8'&9*/'8D';*(9*-"/9(5%#($%-.&'*#8(=%&<9(6/$#*"8*D(#"686/@(';*(.#6$*(%5($%-.&'*#8("/9';&8(6/$#*"86/@(';*(A"<&*(%5(-"#@6/"<(.#%9&$'(%5(=%#B*#8(=;%(.#%9&$*$%-.&'*#82((?;68(68(8;%=/(6/(J6@&#*(1KEC("8("(8;65'(6/(';*(9*-"/9($&#A*(5%#<":%#(5#%-(L ('%(L 2((?;*(#*8&<'(68("/(6/$#*"8*(6/(';*(="@*(5#%-(= ('%(= ("/9("/6/$#*"8*(6/(';*(>&"/'6'0(%5(<":%#(5#%-(P ('%(P 2
Wag
e
Quantity of LaborL1 L2
D2
D1
Supply
w2
w1
Wag
e
Quantity of LaborL2L1
S1
Demand
S2
w1
w2
!"#$%&#'()#"$*(+(,%-."/018-3
:2 R5(-%#*($%<<*@*(8'&9*/'8(-"S%#(6/(*/@6/**#6/@("/9($%-.&'*#(8$6*/$*D(';*(8&..<0%5(<":%#(6/(';*($%-.&'*#(6/9&8'#0(#68*82((?;68(68(8;%=/(6/(J6@&#*(1KEH("8("(8;65'6/(';*(8&..<0($&#A*(5#%-(O ('%(O 2((?;*(#*8&<'(68("(9*$#*"8*(6/(';*(="@*(5#%-(='%(= ("/9("/(6/$#*"8*(6/(';*(>&"/'6'0(%5(<":%#(5#%-(P ('%(P 2
Wag
e
Quantity of LaborL1 L2
D1
Supply
w2
w1
D2
!"#$%&#'()#"$*(+(,%-."/018-4
$2 R5($%-.&'*#(56#-8(:&6<9(/*=(-"/&5"$'/@(.<"/'8D(';68(6/$#*"8*8(';*(-"#@6/"<.#%9&$'(%5(<":%#("/9(';*(A"<&*(%5(';*(-"#@6/"<(.#%9&$'(%5(<":%#(5%#("/0(@6A*/>&"/'6'0(%5(<":%#2((?;68(68(8;%=/(6/(J6@&#*(1KET("8("(8;65'(6/(';*(9*-"/9($&#A*5%#(<":%#(5#%-(L ('%(L 2((?;*(#*8&<'(68("/(6/$#*"8*(6/(';*(="@*(5#%-(= ('%(="/9("/(6/$#*"8*(6/(';*(>&"/'6'0(%5(<":%#(5#%-(P ('%(P 2
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
T2 O6/$*(0%&#(&/$<*(68(-"F6-6G6/@(;68(.#%56'D(;*(-&8'(:*(;6#6/@(=%#B*#8(8&$;(';"'(';*6#="@*(*>&"<8(';*(A"<&*(%5(';*6#(-"#@6/"<(.#%9&$'2((O6/$*(';*(="@*(68(UV(.*#(;%&#D(';*6#A"<&*(%5(-"#@6/"<(.#%9&$'(-&8'(:*(UV(.*#(;%((O6/$*(';*(A"<&*(%5(-"#@6/"<(.#%9&$'*>&"<8(';*(-"#@6/"<(.#%9&$'('6-*8(';*(.#6$*(%5(';*(@%%9D("/9(86/$*(';*(.#6$*(%5("8"/9=6$;(68(UCD(';*(-"#@6/"<(.#%9&$'(%5("(=%#B*#(-&8'(:*(3(8"/9=6$;*8(.*#(;%
Ren
tal P
rice
of C
apita
l
Quantity of CapitalK2K1
S1
Demand
S2
r1
r2W
age
Quantity of LaborL1 L2
D1
Supply
w2
w1
D2
!"#$%&#'()#"$*(+(,%-."/018-5
V2 "2 J6@&#*(1KEV(8;%=8(';*(W2O2($".6'"<(-"#B*'(=;*/(';*#*78("/(6/5<%=(%5($".6'"<5#%-(":#%"92((?;*(6/5<%=(%5($".6'"<(8;65'8(';*(8&..<0($&#A*('%(';*(#6@;'D(5#%-(O'%(O 2((?;*(#*8&<'(68("(#*9&$'6%/(6/(';*(#*/'"<(#"'*(%/($".6'"<(5#%-(# ('%(# ("/9("/6/$#*"8*(6/(';*(>&"/'6'0(%5($".6'"<(5#%-(X ('%(X 2
:2 ?;*(6/$#*"8*(6/($".6'"<(6/$#*"8*8(';*(-"#@6/"<(.#%9&$'(%5(<":%#("/9(';*(A"<&*(%5-"#@6/"<(.#%9&$'(%5(<":%#(5%#("/0(@6A*/(>&"/'6'0(%5(<":%#2((J6@&#*(1KEY(8;%=8';68("8("(8;65'(6/(';*(9*-"/9(5%#(<":%#(5#%-(L ('%(L 2((48("(#*8&<'D(';*(="@*(#"'*#68*8(5#%-(= ('%(= ("/9(';*(>&"/'6'0(%5(<":%#(#68*8(5#%-(P ('%(P 2
Wag
e, V
alue
of M
argi
nal P
rodu
ct o
f Lab
or
Quantity of Labor
Wage
VMPL10
1 2 3 4 5 6
20
30
40
50
60
70
!"#$%&#'()#"$*(+(,%-."/018-6
Y2 ?;*(5%<<%=6/@('":<*(8;%=8(';*(-"#@6/"<(.#%9&$'(%5(<":%#("/9(';*(A"<&*(%5(';*(-"#@6/"<.#%9&$'(%5(<":%#Z
P N [MP \[MP
] (]Y Y]
1 (YV V]
3 1CV V]
C 1^V V]
H 3TC C]
T 3K1 1]
V 3^
J6@&#*(1KEK(.<%'8(';*(56#-78(9*-"/9(5%#(<":%#2((O6/$*(';*(="@*(68(UT](.*#(9"0D(';*(56#-8;%&<9(;6#*(5%&#(=%#B*#82((J%#(*"$;(%5(';*(56#8'(5%&#(=%#B*#8D(';*(A"<&*(%5(';*(-"#@6/"<.#%9&$'(%5(<":%#(*F$**98(';*(="@*2(()&'(5%#(-%#*(';"/(5%&#(=%#B*#8D(';*(A"<&*(%5(';*-"#@6/"<(.#%9&$'(68(<*88(';"/(';*(="@*2((O%(';*(56#-(-"F6-6G*8(.#%56'(:0(;6#6/@(5%&#=%#B*#82
Wag
e
Quantity of LaborL2 L1
D2
Supply
w1
w2
w1–$3 D1
!"#$%&#'()#"$*(+(,%-."/018-7
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
:2 O6/$*(';*(8&..<0($&#A*(;"8("(.%86'6A*(:&'(56/6'*(8<%.*D(';*(/*=(*>&6<6:#6&-(=6<<:*(%/*(6/(=;6$;(';*(/*=(="@*D(= D(68(<*88(';"/(';*(%<9(="@*D(= D(:&'(= (_(= (EUC2((?;*(>&"/'6'0(%5(<":%#("<8%(9*$<6/*82
R5(';*(<":%#(8&..<0($&#A*(68(A*#'6$"<D(';*/(= (=%&<9(*>&"<(= (E(UCD("/9(';*#*=%&<9(:*(/%($;"/@*(6/(';*(>&"/'6'0(%5(<":%#2
$2 ?;*(.#*$*96/@("/"<0868(68(6/$%-.<*'*D(%5($%*D(:*$"&8*(6'(6@/%#*8(';*(5"$'(';"'';*(5#6/@*(:*/*56'8("#*(A"<&":<*('%(=%#B*#82((48("(#*8&<'D(';*(8&..<0($&#A*(%5<":%#(=6<<(6/$#*"8*D(8;%=/("8("(8;65'('%(';*(#6@;'(6/(';*(8&..<0(%5(<":%#(6/(J6@&#*1KE1]2((R/(@*/*#"<D(=%#B*#8(=%&<9(.#*5*#($"8;('%(8.*$656$(:*/*56'8D(8%(';*-"/9"'*9(5#6/@*(:*/*56'8("#*/7'(=%#';("8(-&$;("8($"8;(=%&<9(:*2(()&'(6/(';*$"8*(%5(5#6/@*(:*/*56'8(';*#*("#*('=%(%558*''6/@("9A"/'"@*8Z((`1a(5#6/@*(:*/*56'8"#*/7'('"F*9b("/9(`3a(56#-8(%55*#($;*".*#(.#%A686%/(%5(;*"<';($"#*(';"/(=%#B*#8$%&<9(.&#$;"8*(%/(';*6#(%=/2((O%(=;*';*#(';*(5#6/@*(:*/*56'8("#*(=%#';(-%#*(%#<*88(';"/(UC(9*.*/98(%/(=;6$;(%5(';*8*(*55*$'8(9%-6/"'*82((
Wag
e
Quantity of LaborL1 L2
D2
S2
S1
w1
w2
w1–$3
D1
!"#$%&#'()#"$*(+(,%-."/018-8
J6@&#*(1KE1](68(9#"=/(&/9*#(';*("88&-.'6%/(';"'(';*(5#6/@*(:*/*56'8("#*(=%#';-%#*(';"/(UC('%(';*(=%#B*#82((R/(';68($"8*D(';*(/*=(="@*D(= D(68(<*88(';"/(= (EUC("/9(';*(>&"/'6'0(%5(<":%#(6/$#*"8*8(5#%-(P ('%(P 2
R5(';*(8;65'(6/(';*(8&..<0($&#A*(=*#*(';*(8"-*("8(';*(8;65'(6/(';*(9*-"/9($&#A*D';*/(= (c(= (E(UC("/9(';*(>&"/'6'0(%5(<":%#(#*-"6/8(&/$;"/@*92
R5(';*(8;65'(6/(';*(8&..<0($&#A*(=*#*(<*88(';"/(';*(8;65'(6/(';*(9*-"/9($&#A*D(';*/= (_(= (E(UC("/9(';*(>&"/'6'0(%5(<":%#(9*$#*"8*82
R/("<<(';#**($"8*8(';*#*78("(<%=*#(="@*("/9(;6@;*#(>&"/'6'0(%5(<":%#(';"/(65(';*8&..<0($&#A*(=*#*(&/$;"/@*92
92 O6/$*("(-6/6-&-E="@*(<"=(=%&<9/7'("<<%=(';*(="@*('%(9*$<6/*(=;*/(@#*"'*#5#6/@*(:*/*56'8("#*(-"/9"'*9D(6'(=%&<9(<*"9('%(6/$#*"8*9(&/*-.<%0-*/'D(:*$"&8*56#-8(=%&<9(#*5&8*('%(."0(=%#B*#8(-%#*(';"/(';*(A"<&*(%5(';*6#(-"#@6/"<.#%9&$'2
!"#$%&#'()#"$*(+(,%-."/018-9
^2 "2 4(&/6%/(68(<6B*("(-%/%.%<0(56#-(6/(';"'(6'(68(';*(%/<0(8&..<6*#(%5(<":%#D(S&8'("8("-%/%.%<0(68(';*(%/<0(8&..<6*#(%5(';*(@%%92
:2 d&8'("8("(-%/%.%<0(56#-(="/'8('%(-"F6-6G*(.#%56'8D("(<":%#(&/6%/(-"0(=68;('%-"F6-6G*(';*(<":%#(6/$%-*(%5(6'8(-*-:*#82
$2 d&8'("8(';*(-%/%.%<0(.#6$*(*F$**98(';*($%-.*'6'6A*(.#6$*(6/(';*(-"#B*'(5%#("@%%9D(';*(&/6%/(="@*(*F$**98(';*(5#**E-"#B*'(="@*(6/(';*(-"#B*'(5%#(<":%#2(4/9(S&8'("8(';*(>&"/'6'0(%5(%&'.&'(%5("(-%/%.%<0(68(<*88(';"/(';*(>&"/'6'0.#%9&$*9(:0("($%-.*'6'6A*(6/9&8'#0D(*-.<%0-*/'(:0("(&/6%/6G*9(56#-(68(<*88';"/(*-.<%0-*/'(:0("(/%/E&/6%/6G*9(56#-D(86/$*(';*(&/6%/(="@*(68(;6@;*#2
92 W/6%/8(-6@;'(=68;('%(-"F6-6G*('%'"<(<":%#(6/$%-*(%5(';*6#(-*-:*#8D(%#(';*0-6@;'(="/'(';*(;6@;*8'(="@*(.%886:<*D(%#(';*0(-6@;'(=68;('%(;"A*(';*(@#*"'*8'*-.<%0-*/'(.%886:<*2((R/("996'6%/D(';*0(-"0(=68;('%(;"A*(6-.#%A*9(=%#B6/@$%/96'6%/8D(6/$#*"8*9(5#6/@*(:*/*56'8D(%#(6/.&'(6/'%("(56#-78(9*$686%/82
!"#$%&#'()#"$*(+(,%-."/0
19-1
!"#$%&'()*+((,#'-.-/0(#-1(2.03'.4.-#%.5-
67&0%.5-0(85'(9&:.&;+((<-0;&'0
12 ,%"3(-4/*#5(6*'(."47(-%#*('8"/(%'8*#(9%#:*#5(94'8(54-43"#("-%&/'5(%;(*7&$"'4%/2(
<8*4#(8468*#(9"6*($%-.*/5"'*5('8*-(;%#('8*(74#'0("/7(7"/6*#%&5(/"'&#*(%;($%"3(-4/4/6=
"5(9*33("5('8*4#(3%/6>'*#-(8*"3'8(.#%?3*-52((@5("(#*5&3'=('8*0(*"#/("(54A"?3*
$%-.*/5"'4/6(74;;*#*/'4"32
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F2 C7&$"'4%/(-468'(#"45*("(9%#:*#G5(9"6*(94'8%&'(#"454/6('8*(9%#:*#G5(.#%7&$'4E4'0(4;
*7&$"'4%/(.#%E47*5("(546/"3('8"'('8*(9%#:*#(8"5(8468("?434'02
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8"E*=('8*("-%&/'(%;(*D.*#4*/$*('8*0(8"E*=("/7('8*(.%554?434'0(%;($%-.*/5"'4/6
74;;*#*/'4"352
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#"$*=(54/$*(?&54/*55(%9/*#5(98%($"#*(%/30("?%&'(-":4/6(-%/*0("#*("'("/("7E"/'"6*
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4/$%-*(4/*\&"34'0(7*$34/*52
Wag
e
QuantityQuantity
Skilled LaborUnskilled Labor
Demand Demand
Wag
eS1
S1
S2
S2
!"#$%&#'()#"$*(+(,%-."/0
19-3
W2 "2 C$%/%-4$5(.#%;*55%#5(-"0(#*$*4E*(8468*#(5"3"#4*5('8"/(.#%;*55%#5(4/(5%-*(%'8*#
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1C2 95/$*(_%4/(;*:5*?*6('4"'(:";%#(6&..:0(56(45>4:0(*:"6'5$A(4*(B5::(B"/'(:*66(#*@56'#5;&'5%/%7(5/$%-*A(;*$"&6*(*:"6'5$(:";%#(6&..:0(-*"/6("(>#*"'*#(@56'%#'5%/(7#%-(#*@56'#5;&'5?*.%:5$5*62
1H2 "2 M7(0%&(">#**(B5'4('4*(6'"'*-*/'('4"'(`a?*#0(."#*/'(4"6('4*(#5>4'('%(B%#=(4"#@"/@(6"?*(5/(%#@*#('%(>5?*(456(%#(4*#($45:@#*/("(;*''*#(:57*A`('4*/(0%&E::('45/=5/4*#5'"/$*('"V*6(64%&:@(;*(:%B2((M7(0%&(@56">#**A(0%&E::('45/=(5/4*#5'"/$*('"V*664%&:@(;*(45>42
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Win
e
Cheese500
1,000
!"#$%&#'()#"$*(+(,%-."/021-1
!"#$%&'()*+((,"&(,"&-'.(-/(!-0123&'(!"-45&
62&1%4-01(/-'(7&84&9+((:019&'1
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
Win
e
Cheesec
1
MRSw
Win
e
Cheesec* 500
1,000
w*
!"#$%&#'()#"$*(+(,%-."/021-2
E2 T/(456&#*(7187F(':*(-"#65/"3(#"'*(%B(9&=9'5'&'5%/(PUVWQ(%B(%/*(.%5/'(%/("/(5/>5BB*#*/$*$&#J*(59(9:%;/2((?:*(-"#65/"3(#"'*(%B(9&=9'5'&'5%/(9:%;9(':*("-%&/'(%B(;5/*(':*$%/9&-*#(;%&3>(=*(;5335/6('%(65J*(&.('%(6*'(%/*(-%#*(.%&/>(%B($:**9*2
S2 456&#*(718E(9:%;9(':*($%/9&-*#<9(=&>6*'($%/9'#"5/'("/>(5/>5BB*#*/$*($&#J*9(B%#(;5/*"/>($:**9*2((?:*($%/9&-*#<9(%.'5-&-($%/9&-.'5%/($:%5$*(59(9:%;/("9(; ("/>($ 2(W5/$*(':*(-"#65/"3(#"'*(%B(9&=9'5'&'5%/(*R&"39(':*(#*3"'5J*(.#5$*(%B(':*(';%(6%%>9("'(':*%.'5-&-F(':*(-"#65/"3(#"'*(%B(9&=9'5'&'5%/(59(DHLDE(M(72
Win
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Cheesec1 c2
BC2BC1
w2w1
Win
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Cheesec2 c1
BC2BC1
w2
w1
!"#$%&#'()#"$*(+(,%-."/021-3
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Win
e
CheeseC3 C1C2 500
1,000
w2
w1
w3
BC2 BC3
B
A
C
BC1
300
!"#$%&#'()#"$*(+(,%-."/021-4
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12 "2 456&#*(718Z(9:%;9(':*(*BB*$'(%B(':*(B#%9'(%/(\*//5B*#<9(=&>6*'($%/9'#"5/'2((W5/$*':*(.#5$*(%B($%BB**(#59*9F(:*#(=&>6*'($%/9'#"5/'(9;5J*39(B#%-(), ('%(), 2
Cro
issa
nts
CoffeeBC2 BC1
I2
I1
BA
Cro
issa
nts
CoffeeBC2 BC1
I2
I1
AB
!"#$%&#'()#"$*(+(,%-."/021-5
=2 TB(':*(9&=9'5'&'5%/(*BB*$'(%&';*56:9(':*(5/$%-*(*BB*$'(B%#($#%599"/'9F(\*//5B*#=&09(-%#*($#%599"/'9("/>(3*99($%BB**F("9(9:%;/(5/(456&#*(718Z2((W:*(-%J*9(B#%-.%5/'(X('%(.%5/'()2
$2 TB(':*(5/$%-*(*BB*$'(%&';*56:9(':*(9&=9'5'&'5%/(*BB*$'(B%#($#%599"/'9F(\*//5B*#=&09(B*;*#($#%599"/'9("/>(3*99($%BB**F(-%J5/6(B#%-(.%5/'(X('%(.%5/'()(5/(456&#*718]2
Milk
Cookies25
50
!"#$%&#'()#"$*(+(,%-."/021-6
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E2 "2 ,:**9*("/>($#"$Y*#9($"//%'(=%':(=*(5/B*#5%#(6%%>9F(95/$*(5B(U"#5%<9(5/$%-*#59*9(:*(-&9'($%/9&-*(-%#*(%B(9%-*':5/62
=2 TB(':*(.#5$*(%B($:**9*(B"339F(':*(9&=9'5'&'5%/(*BB*$'(-*"/9(U"#5%(;533($%/9&-*-%#*($:**9*("/>(3*99($#"$Y*#92((?:*(5/$%-*(*BB*$'(-*"/9(U"#5%(;533($%/9&-*-%#*($:**9*(P95/$*($:**9*(59("(/%#-"3(6%%>Q("/>(3*99($#"$Y*#9(P95/$*($#"$Y*#9"#*("/(5/B*#5%#(6%%>Q2((W%F(=%':(*BB*$'9(3*">(U"#5%('%($%/9&-*(-%#*($:**9*("/>3*99($#"$Y*#92
S2 "2 456&#*(718_(9:%;9(\5-<9(=&>6*'($%/9'#"5/'2((?:*(J*#'5$"3(5/'*#$*.'(59(IG(R&"#'9%B(-53YF(95/$*(5B(\5-(9.*/'("33(:59(-%/*0(%/(-53Y(:*(;%&3>(=&0(D1GGLD7(M(IGR&"#'9(%B(5'2((?:*(:%#5@%/'"3(5/'*#$*.'(59(7I(>%@*/($%%Y5*9F(95/$*(5B(\5-(9.*/'("33:59(-%/*0(%/($%%Y5*9(:*(;%&3>(=&0(D1GGLDS(M(7I(>%@*/($%%Y5*92
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Con
sum
ptio
n
Leisure
BC1
BC2
Con
sum
ptio
n
Leisure
BC1
BC2
!"#$%&#'()#"$*(+(,%-."/021-7
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Con
sum
ptio
n
Leisure
BC1
BC2
Con
sum
ptio
n
Leisure
BC1
BC2
!"#$%&#'()#"$*(+(,%-."/021-8
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Con
sum
ptio
n
Leisure
BC3
BC2
$1,000
$800
$600BC1
L8 L6L10 100
Con
sum
ptio
n
Leisure
!"#$%&#'()#"$*(+(,%-."/021-9
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
Con
sum
ptio
n
Leisure
BC2
BC1
L1 L2
Con
sum
ptio
n
Leisure
BC2
BC1
L2 L1
!"#$%&#'()#"$*(+(,%-."/021-10
]2 "2 456&#*(7181H(9:%;9(:%;("(#59*(5/(':*(5/$%-*(%B("(:&9="/>($"/(3*">('%("(B"33(5/':*(/&-=*#(%B(:%	(;%#Y*>(=0(:59(;5B*2((?:*(5/$#*"9*(5/(':*(5/$%-*(%B(':*:&9="/>(59(9:%;/(=0("(9:5B'(%B(':*(;5B*<9(=&>6*'($%/9'#"5/'(B#%-(), ('%(), 2(W5/$*(:*#(5/$%-*(59(:56:*#F(5B(3*59&#*(59("(/%#-"3(6%%>F(9:*<33(;"/'(-%#*(3*59&#*"/>(':&9(;%#Y(3*99F("9(':*(B56&#*(9:%;92
=2 456&#*(7181Z(9:%;9(:%;("(#59*(5/(B*-"3*(;"6*9("BB*$'9("(;%-"/<9(>*$595%/(%B:%;(-"/0(:%	('%(;%#Y2((?:*(#59*(5/(;"6*9(3*">9('%("(9&=9'5'&'5%/(*BB*$'F;:5$:(>*$#*"9*9(3*59&#*("/>(5/$#*"9*(;%#Y(:%	F("/>("/(5/$%-*(*BB*$'F(;:5$:5/$#*"9*9(3*59&#*("/>(>*$#*"9*9(;%#Y(:%	(5B(3*59&#*(59("(/%#-"3(6%%>2((TB(':*9&=9'5'&'5%/(*BB*$'(>%-5/"'*9F(':*(;%-"/(;533(;%#Y(-%#*(:%	F("9(':*(B56&#*9:%;92
Con
sum
ptio
n W
hen
Old
Consumption When Young
BC242
31.5
BC1
30 40
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Inte
rest
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Loanable Funds
Demand
S1
S2
L1L1 − 20 L2
i1i2
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$2 34*(-%#*(*7"8'6$(68('4*(8&..70(%5(7%"/">7*(5&/?8@('4*(57"''*#('4*(8&..70($&#:*<%&7?(>*@(8%('4*(6/'*#*8'(#"'*(<%&7?(#68*(>0(7*88("/?('4&8(/"'6%/"7(8":6/;(<%&7?5"77(>0(7*88@("8(R6;&#*(AKOA(84%<82
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i
L
Inelastic Supply
L2
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L1
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Elastic Supply
L2
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i2i1
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L
Inelastic Demand
L2
S2
S1
L1
D
D
i2
i1
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Elastic Demand
L2
S2S1
L1
i2i1
!"#$%&#'()#"$*(+(,%-."/025/13-5
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Inte
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Rat
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Loanable Funds
Supply
D1D2
L1L2
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tere
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Loanable Funds
Supply
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!"#$%&#'()#"$*(+(,%-."/026/14-2
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Wag
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Quantity of Labor
Demand
Supply
L1S L2
SL1DL2
D
m1
m2
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Wag
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Quantity of Labor
S1
D2
D1
S2
L1
w1
w1 − $4
!"#$%&#'()#"$*(+(,%-."/026/14-6
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Wag
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Quantity of Labor
S1
S2
D2D1
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Wag
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Quantity of Labor
D2
D1
L2 L1
w1
w2
w1 − $4
Supply
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9*-"/9($&#;*(7%#(9%66"#5(6*"95('%("(9*$6:/*(:/('4*(#*"6(*>$4"/<*(#"'*B(?4:$4(:/$#*"5*5
/*'(*>.%#'52((Q:/$*(/*'(7%#*:</(:/;*5'-*/'(:5(&/$4"/<*9B("/9(/*'(*>.%#'5(*K&"65(/*'
7%#*:</(:/;*5'-*/'B('4*#*(:5(/%($4"/<*(:/(*K&:6:8#:&-(:/(/*'(*>.%#'5(%#('4*('#"9*
8"6"/$*2(()&'(8%'4(:-.%#'5("/9(*>.%#'5(#:5*B(5%(*>.%#'(:/9&5'#:*5(8*/*7:'2
U2 "2 V4*/('4*(G#*/$4(9*;*6%.("(5'#%/<('"5'*(7%#(,"6:7%#/:"(?:/*5B('4*(9*-"/9(7%#
9%66"#5(:/('4*(7%#*:</F$&##*/$0(-"#=*'(:/$#*"5*5("'("/0(<:;*/(#*"6(*>$4"/<*(#"'*B
"5(54%?/(:/(G:<&#*(CHFU2
82 34*(#*5&6'(%7('4*(:/$#*"5*9(9*-"/9(7%#(9%66"#5(:5("(#:5*(:/('4*(#*"6(*>$4"/<*(#"'*2
$2 34*(K&"/':'0(%7(/*'(*>.%#'5(:5(&/$4"/<*92
Rea
l Int
eres
t Rat
e
Quantity of Loanable Funds
Supply
r1
Demand
Net Foreign Investment
Rea
l Int
eres
t Rat
e
Quantity of Dollars
D2
E2
E1
D1
Rea
l Exc
hang
e R
ate
Net Foreign Investment
Supply
!"#$%&#'()#"$*(+(,%-."/0
30/18-8
W2 E/(*>.%#'(5&85:90(:/$#*"5*5(/*'(*>.%#'5("'("/0(<:;*/(#*"6(*>$4"/<*(#"'*2((34:5($"&5*5
'4*(9*-"/9(7%#(9%66"#5('%(54:7'('%('4*(#:<4'(:/('4*(-"#=*'(7%#(7%#*:</(*>$4"/<*B("5(54%?/
:/(G:<&#*(CHFW2((34*(*77*$'(:5("(4:<4*#(#*"6(*>$4"/<*(#"'*B(8&'(/%($4"/<*(:/(/*'(*>.%#'52(
Q%('4*(5*/"'%#(:5(?#%/<X("/(*>.%#'(5&85:90(?:66(/%'(#*9&$*('4*('#"9*(9*7:$:'2
Y2 !:<4*#(#*"6(:/'*#*5'(#"'*5(:/(Z&#%.*(6*"9('%(:/$#*"5*9(P2Q2(/*'(7%#*:</(:/;*5'-*/'2(
!:<4*#(/*'(7%#*:</(:/;*5'-*/'(6*"95('%(4:<4*#(/*'(*>.%#'5B(5:/$*(:/(*K&:6:8#:&-(/*'
*>.%#'5(*K&"6(/*'(7%#*:</(:/;*5'-*/'(M[\][GDN2((G:<&#*(CHFY(54%?5('4"'('4*(:/$#*"5*
:/(/*'(7%#*:</(:/;*5'-*/'(6*"95('%("(6%?*#(#*"6(*>$4"/<*(#"'*B(4:<4*#(#*"6(:/'*#*5'(#"'*B
"/9(:/$#*"5*9(/*'(*>.%#'52((
Rea
l Int
eres
t Rat
e
Quantity of Loanable Funds
Supply
r2
r1
Demand
NFI1
NFI2
Rea
l Int
eres
t Rat
e
Quantity of Dollars
D2
E1
E2
D1
Rea
l Exc
hang
e R
ate
Net Foreign Investment
S2S1
!"#$%&#'()#"$*(+(,%-."/0
30/18-9
1H2 "2 D7('4*(*6"5':$:'0(%7(P2Q2(/*'(7%#*:</(:/;*5'-*/'(?:'4(#*5.*$'('%('4*(#*"6(:/'*#*5'
#"'*(:5(;*#0(4:<4B('4*(6%?*#(#*"6(:/'*#*5'(#"'*('4"'(%$$(8*$"&5*(%7('4*(:/$#*"5*
:/(.#:;"'*(5";:/<(?:66(:/$#*"5*(/*'(7%#*:</(:/;*5'-*/'("(6%'B(5%(P2Q2(9%-*5':$
:/;*5'-*/'(?%/O'(:/$#*"5*(-&$42
82 Q:/$*("/(:/$#*"5*(:/(.#:;"'*(5";:/<(#*9&$*5('4*(#*"6(:/'*#*5'(#"'*B(:/9&$:/<("/
:/$#*"5*(:/(/*'(7%#*:</(:/;*5'-*/'B('4*(#*"6(*>$4"/<*(#"'*(?:66(9*$6:/*2((D7('4*
*6"5':$:'0(%7(P2Q2(*>.%#'5(?:'4(#*5.*$'('%('4*(#*"6(*>$4"/<*(#"'*(:5(;*#0(6%?B(:'
?:66('"=*("(6"#<*(9*$6:/*(:/('4*(#*"6(*>$4"/<*(#"'*('%(:/$#*"5*(P2Q2(/*'(*>.%#'5(80
*/%&<4('%(-"'$4('4*(:/$#*"5*(:/(/*'(7%#*:</(:/;*5'-*/'2
112 "2 V4*/(Z&#%.*"/5(8*$%-*(-%#*(:/'*#*5'*9(:/(:/;*5':/<(:/(,"/"9"B(,"/"9"O5(/*'
7%#*:</(:/;*5'-*/'(9*$6:/*52((34:5(54:7'5('4*(9*-"/9(7%#(6%"/"86*(7&/95('%('4*
6*7'("/9('4*(/*'(7%#*:</(:/;*5'-*/'($&#;*('%('4*(6*7'B("5(54%?/(:/(G:<&#*(CHF1H2(
D/(*K&:6:8#:&-B(,"/"9:"/(/*'(7%#*:</(:/;*5'-*/'(9*$6:/*52
Rea
l Int
eres
t Rat
e
Quantity of Loanable Funds
Supply
r1
r2
Demand
NFI2
NFI1
Rea
l Int
eres
t Rat
e
Quantity of Canadian Dollars
D1
E2
E1
D2R
eal E
xcha
nge
Rat
e
Net Foreign Investment
S1S2
!"#$%&#'()#"$*(+(,%-."/0
30/18-10
82 E5('4*(7:<&#*(54%?5B('4*(#*"6(:/'*#*5'(#"'*(9*$6:/*5B('4&5(#*9&$:/<(,"/"9"O5
.#:;"'*(5";:/<2(()&'('4*(9*$6:/*(:/('4*(#*"6(:/'*#*5'(#"'*(:/$#*"5*5(,"/"9"O5
9%-*5':$(:/;*5'-*/'2
$2 Q:/$*(,"/"9"O5(9%-*5':$(:/;*5'-*/'(:/$#*"5*5B(:/('4*(6%/<(#&/B(,"/"9"O5($".:'"6
5'%$=(?:66(:/$#*"5*2
1@2 "2 D7('4*(L"."/*5*(9*$:9*9('4*0(/%(6%/<*#(?"/'*9('%(8&0(P2Q2("55*'5B(P2Q2(/*'
7%#*:</(:/;*5'-*/'(?%&69(:/$#*"5*B(:/$#*"5:/<('4*(9*-"/9(7%#(6%"/"86*(7&/95B("5
54%?/(:/(G:<&#*(CHF112((34*(#*5&6'(:5("(#:5*(:/(P2Q2(:/'*#*5'(#"'*5B("/(:/$#*"5*(:/
'4*(K&"/':'0(%7(P2Q2(5";:/<(M8*$"&5*(%7('4*(4:<4*#(:/'*#*5'(#"'*NB("/9(6%?*#(P2Q2
9%-*5':$(:/;*5'-*/'2
82 D/('4*(-"#=*'(7%#(7%#*:</(*>$4"/<*B('4*(#*"6(*>$4"/<*(#"'*(9*$6:/*5("/9('4*
8"6"/$*(%7('#"9*(:/$#*"5*52
Rea
l Int
eres
t Rat
e
Quantity of Loanable Funds
Supply
r2
r1
Demand
NFI1
NFI2
Rea
l Int
eres
t Rat
e
Quantity of Dollars
D2
E1
E2
D1
Rea
l Exc
hang
e R
ate
Net Foreign Investment
S2S1
!"#$%&#'()#"$*(+(,%-."/0
30/18-11
1C2 "2 34*(-%9*65(5&<<*5'('4"'(/"':%/"6(5";:/<($"/(8*(K&:'*(9:77*#*/'('4"/(9%-*5':$
:/;*5'-*/'2((V4*/(<%;*#/-*/'5(#&/(6"#<*(8&9<*'(9*7:$:'5B('4*(-%9*65(5&<<*5'
'4"'(/*'(7%#*:</(:/;*5'-*/'(?:66(8*(6%?B(5%(/"':%/"6(5";:/<(?:66(8*(6*55('4"/
9%-*5':$(:/;*5'-*/'2((34&5('4*(7:/9:/<('4"'(/"':%/"6(5";:/<(*K&"65(9%-*5':$
:/;*5'-*/'(5**-5('%($%/'#"9:$'('4*(-%9*652
82 D7(:/;*5'%#5("#*(&/?:66:/<('%("$$&-&6"'*('%%(-"/0("55*'5(7#%-("(5:/<6*(7%#*:</
$%&/'#0B('4*/(/*'(7%#*:</(:/;*5'-*/'(?%/O'(8*(;*#0(#*5.%/5:;*('%($4"/<*5(:/("
$%&/'#0O5(#*"6(:/'*#*5'(#"'*2((34&5("(<%;*#/-*/'(8&9<*'(9*7:$:'(?%&69(6*"9('%("
6"#<*(*/%&<4(:/$#*"5*(:/('4*(#*"6(:/'*#*5'(#"'*(5%('4"'(:'(?%&69(#*9&$*(9%-*5':$
:/;*5'-*/'B(?:'4(6:''6*($4"/<*(:/(/*'(7%#*:</(:/;*5'-*/'2((34&5(/"':%/"6(5";:/<
"/9(9%-*5':$(:/;*5'-*/'(?%&69(-%;*($6%5*60('%<*'4*#B(#*$%/$:6:/<('4*(7"$'("/9
'4*(-%9*652
$2 D7(:/;*5'%#5("#*(&/?:66:/<('%("$$&-&6"'*('%%(-"/0("55*'5(7#%-('4*(P/:'*9(Q'"'*5B
'4*(P2Q2('#"9*(9*7:$:'(?%&69/O'(8*(;*#0(4:<4(*;*/(:7('4*(P2Q2(8&9<*'(9*7:$:'
#*-":/5(6"#<*2((D/5'*"9B(P2Q2(9%-*5':$(:/;*5'-*/'(?%&69(#*-":/(6%?2
Pric
e Le
vel
Quantity of Output
Long-runaggregatesupply
Short-runaggregatesupply
Aggregatedemand
!"#$%&#'()#"$*(+(,%-."/0
31/19-1
!"#$%&'()*+((,--'&-#%&(.&/#01(#01(,--'&-#%&(23$$45
63&7%8907(:9'(;&<8&=+((,07=&'7
12 345&#*(6171(89%:8("55#*5"'*(;*-"/;<(89%#'7#&/("55#*5"'*(8&..=0<("/;(=%/57#&/
"55#*5"'*(8&..=02
>2 ?9*("55#*5"'*7;*-"/;($&#@*(48(;%:/:"#;(8=%.4/5(A*$"&8*B((C1D("(;*$#*"8*(4/('9*(.#4$*
=*@*=(-"E*8($%/8&-*#8(F**=(-%#*(:*"='90<(:94$9(4/('&#/(*/$%&#"5*8('9*-('%(8.*/;
-%#*<(8%('9*#*G8("(="#5*#(H&"/'4'0(%F(5%%;8("/;(8*#@4$*8(;*-"/;*;(CI45%&G8(:*"='9
*FF*$'DJ(C>D("(=%:*#(.#4$*(=*@*=(#*;&$*8('9*(4/'*#*8'(#"'*<(*/$%&#"54/5(5#*"'*#(8.*/;4/5
%/(4/@*8'-*/'<(8%('9*#*G8("(="#5*#(H&"/'4'0(%F(5%%;8("/;(8*#@4$*8(;*-"/;*;(CK*0/*8G8
4/'*#*8'7#"'*(*FF*$'DJ(C6D("(F"==(4/('9*(L2M2(.#4$*(=*@*=($"&8*8(L2M2(4/'*#*8'(#"'*8('%(F"==<(8%
'9*(#*"=(*N$9"/5*(#"'*(;*.#*$4"'*8<(8'4-&="'4/5(L2M2(/*'(*N.%#'8<(8%('9*#*G8("(="#5*#
H&"/'4'0(%F(5%%;8("/;(8*#@4$*8(;*-"/;*;(CO&/;*==73=*-4/5G8(*N$9"/5*7#"'*(*FF*$'D2
62 ?9*(=%/57#&/("55#*5"'*(8&..=0($&#@*(48(@*#'4$"=(A*$"&8*(4/('9*(=%/5(#&/<("/(*$%/%-0G8
8&..=0(%F(5%%;8("/;(8*#@4$*8(;*.*/;8(%/(4'8(8&..=4*8(%F($".4'"=("/;(="A%#("/;(%/('9*
"@"4="A=*(.#%;&$'4%/('*$9/%=%50(&8*;('%('&#/($".4'"=("/;(="A%#(4/'%(5%%;8("/;(8*#@4$*82(
?9*(.#4$*(=*@*=(;%*8(/%'("FF*$'('9*8*(=%/57#&/(;*'*#-4/"/'8(%F(#*"=(PQI2
R2 ?9#**('9*%#4*8('9"'(*N.="4/(:90('9*(89%#'7#&/("55#*5"'*78&..=0($&#@*(48(&.:"#;(8=%.4/5
"#*B((C1D('9*(/*:($="884$"=(-48.*#$*.'4%/8('9*%#0<(4/(:94$9("(=%:*#(.#4$*(=*@*=($"&8*8
-48.*#$*.'4%/8("A%&'(#*="'4@*(.#4$*8<("/;('9*8*(-48.*#$*.'4%/8(4/;&$*(8&..=4*#8('%
Pric
e Le
vel
Quantity of Output
Long-runaggregatesupply
SRAS2
AD1
A
C
B
AD2
SRAS1
!"#$%&#'()#"$*(+(,%-."/0
31/19-2
#*8.%/;('%('9*(=%:*#(.#4$*(=*@*=(A0(;*$#*"84/5('9*(H&"/'4'0(%F(5%%;8("/;(8*#@4$*8
8&..=4*;J(C>D('9*(K*0/*84"/(8'4$E07:"5*('9*%#0<(4/(:94$9("(=%:*#(.#4$*(=*@*=(-"E*8
*-.=%0-*/'("/;(.#%;&$'4%/(=*88(.#%F4'"A=*(A*$"&8*(:"5*8(;%(/%'(";S&8'(4--*;4"'*=0('%
'9*(.#4$*(=*@*=<(8%(F4#-8(#*;&$*('9*(H&"/'4'0(%F(5%%;8("/;(8*#@4$*8(8&..=4*;J(C6D('9*(/*:
K*0/*84"/(8'4$E07.#4$*('9*%#0<(4/(:94$9("/(&/*N.*$'*;(F"==(4/('9*(.#4$*(=*@*=(=*"@*8
8%-*(F4#-8(:4'9(9459*#7'9"/7;*84#*;(.#4$*8(A*$"&8*(/%'("==(.#4$*8(";S&8'(4/8'"/'=0('%
$9"/54/5($%/;4'4%/8<(:94$9(;*.#*88*8(8"=*8("/;(4/;&$*8(F4#-8('%(#*;&$*('9*(H&"/'4'0(%F
5%%;8("/;(8*#@4$*8('9*0(.#%;&$*2
T2 ?9*("55#*5"'*7;*-"/;($&#@*(-459'(894F'('%('9*(=*F'(:9*/(8%-*'94/5(C%'9*#('9"/("(#48*(4/
'9*(.#4$*(=*@*=D($"&8*8("(#*;&$'4%/(4/($%/8&-.'4%/(8.*/;4/5(C8&$9("8("(;*84#*(F%#
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#*'&#/8('%(4/@*8'-*/'D<(;*$#*"8*;(5%@*#/-*/'(8.*/;4/5(C8&$9("8("($&'A"$E(4/(;*F*/8*
8.*/;4/5D<(#*;&$*;(/*'(*N.%#'8(C8&$9("8(:9*/(F%#*45/(*$%/%-4*8(5%(4/'%(#*$*884%/<(8%
%&#(*N.%#'8(F"==D<(%#("(;*$#*"8*(4/('9*(-%/*0(8&..=0(C8&$9("8(:9*/('9*(3*;*#"=(U*8*#@*
&8*8(%.*/7-"#E*'(8"=*8D2
345&#*(617>('#"$*8('9#%&59('9*(8'*.8(%F(8&$9("(894F'(4/("55#*5"'*(;*-"/;2((?9*(*$%/%-0
A*54/8(4/(*H&4=4A#4&-<(:4'9(89%#'7#&/("55#*5"'*(8&..=0<(MUVM <(4/'*#8*$'4/5("55#*5"'*
;*-"/;<(VQ <("'(.%4/'(V2((W9*/('9*("55#*5"'*7;*-"/;($&#@*(894F'8('%('9*(=*F'('%(VQ <
'9*(*$%/%-0(-%@*8(F#%-(.%4/'(V('%(.%4/'()<(#*;&$4/5('9*(.#4$*(=*@*=("/;('9*(H&"/'4'0
%F(%&'.&'2((X@*#('4-*<($%8'8(%F(.#%;&$'4%/(;*$=4/*<(894F'4/5('9*(89%#'7#&/("55#*5"'*7
8&..=0($&#@*(;%:/('%(MUVM <("/;(-%@4/5('9*(*$%/%-0(F#%-(.%4/'()('%(.%4/'(,<(:94$9
48(A"$E(%/('9*(=%/57#&/("55#*5"'*(8&..=0($&#@*("/;(9"8("(=%:*#(.#4$*(=*@*=2
Pric
e Le
vel
Quantity of Output
Long-runaggregatesupply
SRAS1
Aggregatedemand
A
B
SRAS2
!"#$%&#'()#"$*(+(,%-."/0
31/19-3
Y2 ?9*("55#*5"'*78&..=0($&#@*(-459'(894F'('%('9*(=*F'(A*$"&8*(%F("(;*$=4/*(4/('9*(*$%/%-0G8
$".4'"=(8'%$E<(.%.&="'4%/<(%#(.#%;&$'4@4'0<("==(%F(:94$9(894F'(A%'9('9*(=%/57#&/("/;(89%#'7
#&/("55#*5"'*(8&..=0($&#@*8('%('9*(=*F'<(%#(A*$"&8*(%F("/(4/$#*"8*(4/('9*(*N.*$'*;(.#4$*
=*@*=<(:94$9(894F'8(S&8'('9*(89%#'7#&/("55#*5"'*78&..=0($&#@*(C/%'('9*(=%/57#&/
"55#*5"'*78&..=0($&#@*D('%('9*(=*F'2
345&#*(6176('#"$*8('9#%&59('9*(*FF*$'8(%F(8&$9("(894F'2((?9*(*$%/%-0(8'"#'8(4/
*H&4=4A#4&-("'(.%4/'(V2((?9*("55#*5"'*78&..=0($&#@*('9*/(894F'8('%('9*(=*F'(F#%-(MUVM
'%(MUVM 2((?9*(/*:(*H&4=4A#4&-(48("'(.%4/'()<('9*(4/'*#8*$'4%/(%F('9*("55#*5"'*7;*-"/;
$&#@*("/;(MUVM 2((V8('4-*(5%*8(%/<('9*(*$%/%-0(#*'&#/8('%(=%/57#&/(*H&4=4A#4&-("'
.%4/'(V<("8('9*(89%#'7#&/("55#*5"'*(8&..=0($&#@*(894F'8(A"$E('%(4'8(%#454/"=(.%84'4%/2
>'9?4&/7(#01(,$$48@#%8907+((,07=&'7
12 Z/@*8'-*/'(48(-%#*(@"#4"A=*('9"/($%/8&-*#(8.*/;4/5(%@*#('9*(A&84/*88($0$=*(A*$"&8*
F4#-8(.&'(%FF(A&04/5($".4'"=(C'9*0(;%/G'(*N."/;(F"$'%#4*8(%#(A&0(/*:(*H&4.-*/'D(4/
#*$*884%/82((I*%.=*("#*("=8%(=*88(=4E*=0('%(A&4=;(/*:(9%&8*8(4/(#*$*884%/82((O&$9(%F
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#*$*884%/82((Q&#"A=*(5%%;8<(8&$9("8(F&#/4'&#*("/;($"#(.&#$9"8*8<("#*(-%#*(@%="'4=*(%@*#
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"8(9"4#$&'8("/;(-*;4$"=($"#*<(F%#('9*(8"-*(#*"8%/2((I*%.=*(.&'(%FF(A&04/5(;&#"A=*(5%%;8
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>2 "2 ?9*($&##*/'(8'"'*(%F('9*(*$%/%-0(48(89%:/(4/(345&#*(617R2((?9*("55#*5"'*7
;*-"/;($&#@*("/;(89%#'7#&/("55#*5"'*78&..=0($&#@*(4/'*#8*$'("'("(.%4/'('%('9*
=*F'(%F(=%/57#&/("55#*5"'*(8&..=02
Pric
e Le
vel
Quantity of Output
Long-runaggregatesupply Short-run
aggregatesupply
Aggregatedemand
!"#$%&#'()#"$*(+(,%-."/0
31/19-4
A2 XE&/G8([":(8&55*8'8('9"'(F%#(*@*#0(.*#$*/'"5*(.%4/'('9"'(#*"=(PQI(5#%:'9(48
A*=%:(4'8(.%'*/'4"=(5#%:'9(#"'*(%F(6(.*#$*/'<('9*(&/*-.=%0-*/'(#"'*(:4==(#48*(A0
1\>(.*#$*/'"5*(.%4/'2((M%(4F(#*"=(PQI(9"8(;*$=4/*;(A0(1(.*#$*/'<(PQI(5#%:'9(48
R(.*#$*/'"5*(.%4/'8(A*=%:(.%'*/'4"=(5#%:'9(%F(6(.*#$*/'<(8%('9*(&/*-.=%0-*/'
#"'*(:4==(A*(R(N(1\>(](>(.*#$*/'"5*(.%4/'8(-%#*('9"/(4'(:"8(="8'(0*"#2
$2 W4'9(*-.=%0-*/'(A*4/5(&/;*#&'4=4^*;<($".4'"=(:4==("=8%(A*(&/;*#&'4=4^*;2((Z/("
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31/19-5
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Pric
e Le
vel
Quantity of Output
Long-runaggregatesupply
SRAS2
Aggregatedemand
A
B
SRAS1
!"#$%&#'()#"$*(+(,%-."/0
31/19-6
V$$%#;4/5('%('9*(/*:(K*0/*84"/(8'4$E07.#4$*('9*%#0<('9*(*$%/%-0(48(4/("
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Pric
e Le
vel
Quantity of Output
Long-runaggregatesupply
Aggregatedemand
B
A
SRAS2
SRAS1
Pric
e Le
vel
Quantity of Output
Long-runaggregatesupply
Short-runaggregatesupply
AD1
B
A
AD2
!"#$%&#'()#"$*(+(,%-."/0
31/19-7
$2 Z/('9*(89%#'7#&/<(*N.*$'"'4%/8(%F(9459*#(4/F="'4%/(:*#*(8%-*:9"'("$$&#"'*<("8('9*
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Pric
e Le
vel
Quantity of Output
Long-runaggregatesupply
Aggregatedemand
B
A
SRAS2
SRAS1
Pric
e Le
vel
Quantity of Output
Long-runaggregatesupply
Short-runaggregatesupply
AD2
B
A
AD1
!"#$%&#'()#"$*(+(,%-."/0
31/19-8
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Pric
e Le
vel
Quantity of Output
Long-runaggregatesupply
SRAS1C
A
BP2
P3
P1
Y1 Y2
AD1
AD2
SRAS2
!"#$%&#'()#"$*(+(,%-."/0
31/19-9
112 "2 ZF(F4#-8(A*$%-*(%.'4-48'4$("A%&'(F&'&#*(A&84/*88($%/;4'4%/8("/;(4/@*8'("(=%'<('9*
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Inte
rest
Rat
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Quantity of Money
Money supply
MD1
MD2
r1
r2
Inte
rest
Rat
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Quantity of Money
MS1 MS2
Money demand
r1
r2
!"#$%&#'()#"$*(+(,%-."/032/20-2
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Inte
rest
Rat
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Quantity of Money
Money supply
MD1
MD2r1
r2In
tere
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Quantity of Money
Money supply
MD1
MD2r1
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!"#$%&#'()#"$*(+(,%-."/032/20-3
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Inte
rest
Rat
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Quantity of Money
MD1
MS1MS2
MD2
r1
r2
Inte
rest
Rat
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Quantity of Money
Money supply
MD1
MD2
r1
r2
!"#$%&#'()#"$*(+(,%-."/032/20-4
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Inte
rest
Rat
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Quantity of Money
MD1
MS1 MS2
MD2
r1
r2
!"#$%&#'()#"$*(+(,%-."/032/20-5
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$2 3%(-"7/'"7/("($%/:'"/'(7/'*#*:'(#"'*K('4*(N*9(=%&69(/**9('%(7/$#*":*('4*(-%/*0:&..60(5#%-(TW ('%(TW 2((34*/("@@#*@"'*(9*-"/9("/9(%&'.&'(=%&69(C*&/"55*$'*92
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Inte
rest
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Quantity of Money
Moneydemand
r1
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MS2MS1
!"#$%&#'()#"$*(+(,%-."/032/20-8
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$2 34*(7/'*#*:'(#"'*(=%&69(C*(47@4*#(7/('4*(6%/@(#&/('4"/(7/('4*(:4%#'(#&/2((>/('4*:4%#'(#&/K('4*(7/$#*":*(7/('4*(-%/*0(:&..60(=%&69(#*9&$*('4*(7/'*#*:'(#"'*2(()&'7/('4*(6%/@(#&/K('4*(7/'*#*:'(#"'*(=%&69(C*(&/"55*$'*92
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1P2 "2 >5('4*(N*9*#"6(V*:*#B*(*?."/9:('4*(-%/*0(:&..60K(":(:4%=/(7/(N7@&#*(IHAaK('4*7/'*#*:'(#"'*(9*$67/*:(7/('4*(:4%#'(#&/2
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$2 34*(:4%#'A#&/(*55*$'(9755*#:(5#%-('4*(6%/@A#&/(*55*$'(C*$"&:*(%5(:'7$\0(.#7$*:2((>/'4*(:4%#'(#&/K(.#7$*:($"/<'("9X&:'('%(#*56*$'('4*($4"/@*(7/('4*(-%/*0(:&..602(()&'7/('4*(6%/@(#&/('4*0(9%2
Infla
tion
Rat
e
Unemployment Rate
Phillips curve
!"#$%&#'()#"$*(+(,%-."/0
33/21-1
!"#$%&'())*((+"&(,"-'%.'/0(+'#1&-22(3&%4&&0(5026#%7-0(#01(80&9$6-:9&0%
;/&<%7-0<(2-'(=&>7&4*((?0<4&'<
12 345&#*(6671(89%:8('9*(89%#'7#&/('#";*%<<(=*':**/(4/<>"'4%/("/;(&/*-.>%0-*/'2((?9*
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C2 345&#*(667C(89%:8('9*(>%/57#&/('#";*%<<(=*':**/(4/<>"'4%/("/;(&/*-.>%0-*/'2((D/('9*
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">%/5("(89%#'7#&/(E94>>4.8($&#@*B(>4F*(GHE, (89%:/(4/('9*(<45&#*2(()&'(%@*#('4-*('9*
89%#'7#&/(E94>>4.8($&#@*(:4>>(894<'('%(#*'&#/('9*(*$%/%-0('%('9*(>%/57#&/(E94>>4.8($&#@*B
<%#(*I"-.>*(894<'4/5(<#%-(GHE, ('%(GHE, 2
Infla
tion
Rat
e
Unemployment Rate
SRPC2
Long-runPhillips curve
SRPC1
Infla
tion
Rat
e
Unemployment Rate
SRPC1
A
BC
Long-runPhillips curve
SRPC2
!"#$%&#'()#"$*(+(,%-."/0
33/21-2
62 ?9*(/"'&#">(#"'*(%<(&/*-.>%0-*/'(-459'(;4<<*#("$#%88($%&/'#4*8(=*$"&8*(;4<<*#*/'
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4/<>&*/$*(>"=%#7-"#F*'($%/;4'4%/82
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GHE, B("/;('9*(*$%/%-0(-%@*8('%(.%4/'(,2((?9*(89%#'7#&/($%8'8(%<(;484/<>"'4%/B(:94$9
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#".4;>02
Infla
tion
Rat
e
Unemployment Rate
SRPC2
5%
3% bd
ca
Long-runPhillips curve
SRPC1
Infla
tion
Rat
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Unemployment Rate
SRPC2
LRPC1 LRPC2
3%
SRPC1
!"#$%&#'()#"$*(+(,%-."/0
33/21-3
@'-A6&9<(#01(?$$67B#%7-0<*((?0<4&'<
12 345&#*(667K(89%:8(':%(;4<<*#*/'(89%#'7#&/(E94>>4.8($&#@*8(;*.4$'4/5('9*8*(<%&#(.%4/'82(
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Infla
tion
Rat
e
Unemployment Rate
SRPC1
Long-runPhillips curve
SRPC2
Infla
tion
Rat
e
Unemployment Rate
Long-runPhillips curve
A
B
Long-runPhillips curve
!"#$%&#'()#"$*(+(,%-."/0
33/21-4
=2 A(;*$>4/*(4/('9*(.#4$*(%<(4-.%#'*;(%4>(894<'8('9*(89%#'7#&/(E94>>4.8($&#@*(;%:/B
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.#%;&$'4%/($%8'8(4/('9*(*$%/%-02
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Infla
tion
Rat
e
Unemployment Rate
SRPC1
Long-runPhillips curve
SRPC2
!"#$%&#'()#"$*(+(,%-."/0
33/21-5
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Pric
e Le
vel
Quantity of Output
Long-runaggregatesupply
SRAS2
A
C
BP2
P1
P3
Y2 Y1
AD2
AD1
SRAS1
Infla
tion
Rat
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Unemployment Rate
Long-runPhillipscurve
A
C
BΠ2
Π1
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SRPC2
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Infla
tion
Rat
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Unemployment Rate
Short-runPhillipscurve
ba
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!"#$%&#'()#"$*(+(,%-."/0
33/21-6
=2 D<(*I.*$'*;(4/<>"'4%/(48(&/$9"/5*;B('9*(#*$*884%/("/;(9459(&/*-.>%0-*/'(#"'*(*@*/'&">>0
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Infla
tion
Rat
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Unemployment Rate
SRPC2
ea
d
Long-runPhillips curve
SRPC1
c
!"#$%&#'()#"$*(+(,%-."/0
33/21-7
=2 A(:"@*(%<(=&84/*88(.*884-48-(#*;&$*8("55#*5"'*(;*-"/;B(-%@4/5('9*(*$%/%-0
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Infla
tion
Rat
e
Unemployment Rate
SRPC3
Long-runPhillips curve
SRPC2
SRPC1
5.5% 6%
!"#$%&#'()#"$*(+(,%-."/0
33/21-8
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Pric
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vel
Quantity of Output
Long-runaggregate supply
AD1
SRAS1
SRAS2
AD2
Y1Y2
A
BC
Inte
rest
Rat
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Quantity of Money
r2
MD1
MD2r1
Pric
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Quantity of Output
P1P2
Y2
AD2
AD1
Y1
Moneysupply
Long-runaggregate supply
Short-runaggregate supply
!"#$%&#'()#"$*(+(,%-."/0
34/22-3
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Inte
rest
Rat
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Quantity of Money
r2r3
MD1
MS1 MS2
MD2r1
Pric
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Quantity of OutputY3Y2
AD2AD3
AD1
Y1
Long-runaggregate supply
Short-runaggregate supply
!"#$%&#'()#"$*(+(,%-."/0
34/22-4
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Infla
tion
Rat
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Unemployment Rate
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SRPC1
SRPC3
SRPC2
A
B
C
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