Module 6

Supply and Demand:

Supply and Equilibrium
KRUGMAN'S
MACROECONOMICS for AP*
Margaret Ray and David Anderson
 Government of Sharjah ‫حكومــــــــــة الشارقـــــــــة‬
Sharjah Private Education Authority ‫هيئة الشارقة للتعليم الخاص‬
Al Rushed American Private School ‫مدرسة الرشد األمريكية الخاصة‬

Subject: AP Microeconomics
Week/ Term: Week 9/ Term 1
Standard: MKT. 4. A: Draw an accurately labeled graph or
visual to represent an economic model or market.
Section 2/ Module 6 : Supply and Demand/ Supply and
Equilibrium
Objective/Learning Target: By the end of the Session To be able
to
1. (Day 1): Identify, Define, and graph Supply and
equilibrium.
2. (Day 2): Define, compare, and create a model of
equilibrium.
3. (Day 3): Read, differentiate, and create the shifts and new
equilibrium.
What you will learn
in this Module:
• What the supply curve is

• The difference between movements along

the supply curve and changes in supply

• The factors that shift the supply curve

• How supply and demand curves determine

a market's equilibrium price and equilibrium
quantity

• In the case of a shortage or surplus, how

price moves the market back to equilibrium
Section 2 | Module 6
The Supply Schedule and the Supply Curve

Vocabulary
• Supply schedule
• Quantity supplied
• Supply Curve
• Law of supply

Section 2 | Module 6
Supply Schedule and Supply Curve
Price Quantity
Price
$8 22
$7 14
$6 8
$5 6
$4 5
$3 4
$2 3

Quantity
Section 2 | Module 6
 Figure 6.1 The Supply Schedule and the Supply Curve
Ray and Anderson: Krugman’s Economics for AP, First Edition
Copyright © 2011 by Worth Publishers Section 2 | Module 6
 Figure 6.2 An Increase in Supply
Ray and Anderson: Krugman’s Economics for AP, First Edition
Copyright © 2011 by Worth Publishers Section 2 | Module 6
Figure 6.3 Movement Along the Supply Curve Versus Shift of the Supply Curve
Ray and Anderson: Krugman’s Economics for AP, First Edition
Copyright © 2011 by Worth Publishers Section 2 | Module 6
Elasticity of Supply

Section 2 | Module 6
Understanding Shifts of the Supply Curve
• Increase = right, decrease = left

• T.R.I.C.E. shifts supply

• Technology

• Related prices (complements in production,

substitutes in production)

• Input prices

• Competition (number of producers)

• Expectations
Section 2 | Module 6
Figure 6.5 The Individual Supply Curve and the Market Supply
Curve
Ray and Anderson: Krugman’s Economics for AP, First Edition
Copyright © 2011 by Worth Publishers
Section 2 | Module 6
 Supply, Demand, and Equilibrium

• Equilibrium
• Equilibrium price
• Equilibrium quantity
• Market-clearing price

Section 2 | Module 6
Finding the Equilibrium Price and Quantity

equilibrium
price E equilibrium

equilibrium
quantity Section 2 | Module 6
Why Does the Market Price Fall If It
Is Above the Equilibrium Price?

• Surplus

• Producer's Incentive

Section 2 | Module 6
Why Does the Market Price Fall If It
Is Above the Equilibrium Price?

Section 2 | Module 6
Why Does the Market Price Rise If It
is Below the Equilibrium Price?

• Shortage

• Consumer's Incentive

• The tendency towards

equilibrium

Section 2 | Module 6
Why Does the Market Price Rise If It
is Below the Equilibrium Price?

Section 2 | Module 6
Why Does the Market Price Rise If It
is Below the Equilibrium Price?

Section 2 | Module 6
 Table 6.1 Factors That Shift Supply
Ray and Anderson: Krugman’s Economics for AP, First Edition Section 2 | Module 6
Copyright © 2011 by Worth Publishers
 CHILLI CHALLENGE

TASK 2
TASK 1 TASK 3

Section 1 | Module 4
Figure 6.6 Market Equilibrium
Copyright © 2011 by Worth Publishers

Section 2 | Module 6
Figure 6.7 Price Above Its Equilibrium Level Creates a Surplus
Section 2 | Module 6
Figure 6.8 Price Below Its Equilibrium Level Creates a Shortage
Copyright © 2011 by Worth Publishers
Section 2 | Module 6
Reflection Time Check your Learning Skills.
Extend
• 2 Things I learned today.
_________________________________
• 1 Question I Still
Have………………..
_________________________________
• What confused me the most
in today’s topics
_________________________________
Section 2 | Module 6
 Refer to the given Graph
Exit Slip

https://ziplet.com/app/#/class/cbf69b92-
1ebf-4503-813d-e8f8be347013

Section 1 | Appendix 1

Section 2 | Module 6
Related Links

1. https://quizizz.com/admin/quiz/5e3c05cf5bd024001bfb2bcc?so
urce=quiz_share
2. https://quizlet.com/325354992/demand-supply-equilibrium-
flash-cards/
3. https://quizizz.com/admin/quiz/5f763226f88088001bc526a6/su
pply-demand-and-equilibrium?fromSearch=true&source=
4. https://quizlet.com/697305647/lesson-303-ab-exit-slip-flash-
cards/
5. https://www.coursera.org/lecture/microeconomics-part1/3-1-8-market-equilibrium-
definition-
OzeUU?utm_medium=sem&utm_source=gg&utm_campaign=B2C_EMEA__coursera_FTCOF_c
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D0ARIsAEbCt6iBGT-
Vd82jXNBwe5tfDzvcI8Yp8UL9vmtslwJV06LyGqnF01r5DWMaAurjEALw_wcB

Section 2 | Module 6
 Homework Check your understanding

Q: Explain whether each of the following events represents

(i) a change in supply or (ii) a movement along the supply
curve.
a. During a real estate boom that causes house prices to rise,
more homeowners put their houses up for sale.
b. Many strawberry farmers open temporary roadside stands
during harvest season, even though prices are usually low at
that time.
c. Immediately after the school year begins, fewer young
people are available to work. Fast-food chains must raise
wages, which represent the price of labor, to attract workers.
d. Many construction workers temporarily move to areas that
have suffered hurricane damage, lured by higher wages.
e. Since new technologies have made it possible to build
larger cruise ships (which are cheaper to run per passenger),
Section 2 | Module 6
 Summary
Equilibrium is the state in
which market supply and
demand balance each
other, and as a result
prices become stable.
Generally, an over-supply of
goods or services causes
prices to go down, which
results in higher demand—
while an under-supply or
shortage causes prices to
go up resulting in less
demand.
Section 2 | Module 6