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Friday, February 8, 2013

Supply





Presently I am watching a series of lectures on Macroeconomics from Missouri State University with Dr. Thomas Wyrick. This series of lectures is available on Roku via the Lecture King channel. It has been very interesting so far.

Presently we are learning about the concepts of supply and demand. To break this down into small bites, we will start with supply. For now, when we are talking about supply we are talking about all of a particular good or service that is available all over the world.
The whole idea of supply in this theoretical world we are discussing is that the higher a price offered the more the market around the world is willing to supply.

As the price the market is willing to pay goes up, the amount of a good or service that is available for purchase goes up. As the price the market is willing to pay goes down, the amount suppliers are willing to produce goes down.

When there is a lot more supply than there is demand, the price is driven downward. Suppliers are willing to make less profit when they see they may be stuck with products or services they can’t sell. When there is a lot more demand than there is supply, prices go up because suppliers see that they can make more profit per unit.

Of course, this all goes back to the concept of Ceteris Paribus: All other things being equal or all other things remaining the same.



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