ECON-221 Lecture Notes - Lecture 10: Aggregate Supply, Demand Curve, Excess Supply
20 Aug 2020
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Document Summary
Point elasticity of supply measures elasticity at a particular point on the supply curve. Arc elasticity of supply is a measurement of elasticity between two points on the supply curve. When firms are making critical decision on the wage rate, they consider the elasticity of supply of individual factors of production. Elasticity of supply is a vital tool for economic analysis. The government when deciding on either supply-side or demand-management policies uses elasticities of demand and supply to make an appropriate move. Supply side policies - policies designed to influence aggregate supply by improving the productivity of the free market economy. Producer surplus this is the difference between the total amount that the producers receive for any quantity of a good and the minimum amount they would have been willing to accept for it. Equilibrium is the situation that results as supply and demand interact in the market place to determine a quantity bought and sold at a stable price.
