【正文】 2020 Pearson AddisonWesley Change in Supply with No Change in Demand When supply increases, there is a movement down along the demand curve. The equilibrium price falls and the equilibrium quantity increases. Predicting Changes in Price and Quantity 169。 2020 Pearson AddisonWesley Price as a Regulator Figure illustrates the equilibrium price and equilibrium quantity. If the price is $ a bar, the quantity supplied exceeds the quantity demanded. There is a surplus of 6 million energy bars. Market Equilibrium 169。 2020 Pearson AddisonWesley Prices of Related Goods Produced A substitute in production for a good is another good that can be produced using the same resources. The supply of a good increases if the price of a substitute in production falls. Goods are plements in production if they must be produced together. The supply of a good increases if the price of a plement in production rises. Supply 169。 2020 Pearson AddisonWesley The Law of Supply The law of supply states: Other things remaining the same, the higher the price of a good, the greater is the quantity supplied。 2020 Pearson AddisonWesley Prices of Related Goods A substitute is a good that can be used in place of another good. A plement is a good that is used in conjunction with another good. When the price of substitute for an energy bar rises or when the price of a plement of an energy bar falls, the demand for energy bars increases. Demand 169。 and the lower the price of a good, the larger is the quantity demanded. The law of demand results from ? Substitution effect ? Ine effect Demand 169。 2020 Pearson AddisonWesley Coordinating Decisions Markets coordinate individual decisions through price adjustments. Economic Coordination 169。 2020 Pearson AddisonWesley Joe specializes in producing salad and he produces 30 salads an hour at point B on his PPF. Gains from Trade 169。 2020 Pearson AddisonWesley Liz’s Comparative Advantage Liz’s opportunity cost of a smoothie is 1 salad. Joe’s opportunity cost of a smoothie is 5 salads. Liz’s opportunity cost of a smoothie is less than Joe’s. So Liz has a parative advantage in producing smoothies. Gains from Trade 169。 2020 Pearson AddisonWesley Liz39。 2020 Pearson AddisonWesley Figure illustrates allocative efficiency. The point of allocative efficiency is the point on the PPF at which marginal benefit equals marginal cost. This point is determined by the quantity at which the marginal benefit curve intersects the marginal cost curve. Using Resources Efficiently 169。 2020 Pearson AddisonWesley In part (b) of Fig. , the bars illustrate the increasing opportunity cost of a pizza. The black dots and the line MC show the marginal cost of producing a pizza. The MC curve passes through the center of each bar. Using Resources Efficiently 169。 2020 Pearson AddisonWesley Tradeoff Along the PPF Every choice along the PPF involves a tradeoff. On this PPF, we must give up some cola to get more pizzas or give up some pizzas to get more cola. Production Possibilities and Opportunity Cost 169。 2020 Pearson AddisonWesley Why does food cost much more today than it did a few years ago? One reason is that we now use part of our corn crop to produce ethanol, a clean biofuel substitute for gasoline. Another reason is that drought in some parts of the world has decreased global grain production. We use an economic model—the production possibilities frontier—to learn why ethanol production and drought have increased the cost of producing food. We also use this model to study how we can expand our production possibilities。 2020 Pearson AddisonWesley Any point on the frontier such as E and any point inside the PPF such as Z are attainable. Points outside the PPF are unattainable. Production Possibilities and Opportunity Cost 169。 2020 Pearson AddisonWesley Increasing Opportunity Cost Because resources are not equally productive in all activities, the PPF bows outward. The outward bow of the PPF means that as the quantity produced of each good increases, so does its opportunity cost. Production Possibilities and Opportunity Cost 169。 2020 Pearson AddisonWesley At point E, with pizza million pizzas available, people are willing to pay 1 can of cola for a pizza. Using Resources Efficiently 169。 2020 Pearson AddisonWesley The Cost of Economic Growth To use resources in research and development and to produce new capital, we must decrease our production of consumption goods and services. So economic growth is not free. The opportunity cost of economic growth is less current consumption. Economic Growth 169。s opportunity cost of producing 1 smoothie is 5 salads. Joe39。 2020 Pearson AddisonWesley Figure shows the gains from trade. Joe initially produces at point A on his PPF. Liz initially produces at point A on her PPF. Gains from Trade 169。 2020 Pearson AddisonWesley To reap the gains from trade, the choices of individuals must be coordinated. To make coordination work, four plimentary social institutions have evolved over the centuries: ? Firms ? Markets ? Property rights ? Money Economic Coordination 169。 2020 Pearson AddisonWesley A market is any arrangement that enables buyers and sellers to get information and do business with each other. A petitive market is a market that has many buyers and many sellers so no single buyer or seller can influence the price. The money price of a good is the amount of money needed to buy it. The relative price of a good—the ratio of its money price to the money price of the next best alternative good—is its opportunity cost. Market and Prices 169。 2020 Pearson AddisonWesley Willingness and Ability to Pay A demand curve is a