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Price. S. P *. D. Q * Quantity. Test Yourself. Which is more important in determining market equilibrium supply or demand? Is it utility or cost of production that determines value?. Answer – both are important - PowerPoint PPT Presentation
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Test YourselfTest Yourself
Which is more important in determiningmarket equilibrium supply or demand?Is it utility or cost of production that determines value?
Answer – both are important
“We might as reasonably dispute whether it is the upper or lower blade of a pair of scissors that cuts a piece of paper, as whether the value is governed by utility or cost” Alfred Marshall 1920 p. 348D
S
Q* Quantity
Pric
e
P*
0
1
2
3
4
5
6
7
8
8.5 9.5 10.5 11.5 12.5 13.5 14.5 15.5
Quantity millions of bushels
Pri
ce
`
Test Your SelfTest Your SelfA
B
C
D
E
F
G
What happens if demand decrease from D1to D2?
H
D1D2
What is new equilibrium point? Why?
What is CS before / after?
What is PS before / after?
What is TS before / after?
0
1
2
3
4
5
6
7
8
8.5 9.5 10.5 11.5 12.5 13.5 14.5 15.5
Quantity millions of bushels
Pri
ce
`
Test Your SelfTest Your SelfA
B
C
D
E
F
G
What happens if demand decrease from D1to D2?
H
D1D2
What is new equilibrium point? Why? Equilibrium points – B to CWhat is CS before / after?
What is PS before / after?
What is TS before / after?
0
1
2
3
4
5
6
7
8
8.5 9.5 10.5 11.5 12.5 13.5 14.5 15.5
Quantity millions of bushels
Pri
ce
`
Test Your SelfTest Your SelfA
B
C
D
E
F
G
What happens if demand decreases from D1to D2?
H
D1D2
What is new equilibrium point? Why?Equilibrium points – B to CWhat is CS before / after? ABF to DCGWhat is PS before / after?
What is TS before / after?
0
1
2
3
4
5
6
7
8
8.5 9.5 10.5 11.5 12.5 13.5 14.5 15.5
Quantity millions of bushels
Pri
ce
`
Test Your SelfTest Your SelfA
B
C
D
E
F
G
What happens if demand decrease from D1to D2?
H
D1D2
What is new equilibrium point? Why? Equilibrium points – B to CWhat is CS before / after?
ABF to DCGWhat is PS before / after?
EBF to ECGWhat is TS before / after?
0
1
2
3
4
5
6
7
8
8.5 9.5 10.5 11.5 12.5 13.5 14.5 15.5
Quantity millions of bushels
Pri
ce
`
Test Your SelfTest Your SelfA
B
C
D
E
F
G
What happens if demand decreases from D1to D2?
H
D1D2
What is new equilibrium point? Why?Equilibrium points – B to CWhat is CS before / after? ABF to DCGWhat is PS before / after?
EBF to ECGWhat is TS before / after?
EBA to ECD
