Macroeconomics

‭●‬ ‭Number‬‭of‬‭Producers‬‭in‬‭the‬‭Market:‬ ‭As‬‭more‬‭producers‬‭enter‬‭the‬‭market‬‭or‬‭industry‬‭(e.g.,‬‭new‬ ‭tech‬ ‭start-ups‬ ‭are‬‭established),‬‭supply‬‭increases,‬‭shifting‬‭the‬‭market‬‭supply‬‭curve‬‭to‬‭the‬‭right,‬ ‭and vice versa.‬

‭●‬ ‭Technology:‬ ‭Technological‬ ‭advancements‬ ‭allow‬ ‭producers‬‭to‬‭turn‬‭input‬‭into‬‭output‬‭more‬‭quickly‬ ‭and‬ ‭effciently.‬ ‭This‬ ‭reduces‬ ‭production‬ ‭costs‬ ‭which encourages producers to increase supply.‬ ‭●‬ ‭Government‬ ‭Policy:‬ ‭Governments‬ ‭influence‬ ‭producers‬‭and‬‭their‬‭supply‬‭in‬‭many‬‭ways.‬‭A‬‭new‬ ‭tax‬‭on‬‭a‬‭certain‬‭product,‬‭for‬‭example,‬‭reduces‬‭its‬ ‭supply.‬ ‭Subsidies,‬ ‭on‬ ‭the‬ ‭other‬ ‭hand,‬ ‭represent‬ ‭direct‬ ‭payments‬ ‭made‬ ‭by‬ ‭governments‬ ‭to‬ ‭producers‬ ‭of‬ ‭certain‬ ‭goods‬ ‭and‬ ‭services.‬ ‭These‬ ‭payments‬ ‭encourage‬ ‭producers‬ ‭to‬ ‭supply‬‭more,‬ ‭shifting their supply curve to the right.‬

‭Note that other factors in agricultural markets, such as natural disasters that affect crops, can also‬ ‭influence supply.‬ ‭Individual Supply, Market Supply, and Aggregate Supply‬ ‭The‬ ‭individual‬ ‭supply‬ ‭curve‬ ‭represents‬ ‭the‬‭relationship‬‭between‬‭the‬‭price‬‭and‬‭quantity‬‭supplied‬‭of‬‭a‬ ‭single‬ ‭producer‬‭derived‬‭from‬‭an‬‭individual‬‭supply‬‭schedule.‬‭The‬ ‭market‬‭supply‬‭curve‬ ‭(microeconomics)‬ ‭is‬‭derived‬‭by‬‭adding‬‭all‬‭individual‬‭supply‬‭curves‬‭of‬ ‭all‬‭producers‬‭in‬‭a‬‭market‬‭or‬‭industry‬ ‭(e.g.,‬‭vehicle‬ ‭industry).‬‭The‬ ‭total‬‭production‬‭of‬‭goods‬‭and‬‭services‬‭in‬‭an‬‭economy‬ ‭is‬‭referred‬‭to‬‭as‬‭aggregate‬‭supply‬ ‭used to plot the‬ ‭aggregate supply curve‬ ‭(macroeconomics).‬ ‭Market Equilibrium and Disequilibrium‬ ‭So‬‭far,‬‭we‬‭have‬‭identifed‬‭the‬‭factors‬‭that‬‭affect‬‭the‬‭amount‬‭that‬‭households‬‭or‬‭consumers‬‭demand‬‭and‬ ‭the‬ ‭amount‬ ‭that‬ ‭frms‬ ‭supply‬‭in‬‭product‬‭markets.‬‭All‬‭throughout‬‭these‬‭parts,‬‭we‬‭have‬‭emphasized‬‭the‬ ‭role‬ ‭of‬ ‭price‬ ‭as‬ ‭a‬ ‭determinant‬ ‭of‬ ‭both‬ ‭quantity‬ ‭demanded‬ ‭and‬ ‭supplied.‬ ‭Now‬ ‭we‬ ‭will‬ ‭examine‬ ‭how‬ ‭supply and demand in the market interact together to determine the fnal market price.‬ ‭When‬‭consumers‬‭and‬‭suppliers‬‭are‬‭both‬‭satisfed‬‭with‬‭the‬‭current‬‭market‬‭situation,‬‭the‬‭market‬‭is‬‭said‬‭to‬ ‭be‬ ‭in‬ ‭equilibrium.‬ ‭In‬ ‭economics,‬ ‭equilibrium‬ ‭is‬ ‭achieved‬ ‭when‬ ‭the‬ ‭quantity‬ ‭supplied‬ ‭equals‬ ‭the‬ ‭quantity demanded‬ ‭. At equilibrium, there is no tendency‬‭for price to change,‬ ‭ceteris paribus.‬ ‭Graphical Representation of Market Equilibrium‬ ‭Using‬‭demand‬‭and‬‭supply‬‭schedules,‬‭equilibrium‬‭is‬‭determined‬‭at‬‭a‬‭price‬‭where‬‭quantity‬‭demanded‬‭is‬ ‭equal to quantity supplied.‬

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