Microeconomics I

Andr Gomes

Defenition of competitive markets The Market Supply Curve Market Supply with Many Identical Sellers Long and Short Run Supply Long Run and Short Run NYS Apple Supply Curves Graph of the NYS Apple Supply Curves The Effects of Changing a Variable Input Price Changing a Variable Input Price: Industry-level Changes Increasing a Variable Input Price Changing a Fixed Input Price: Industry-level Changes The Effects of Changing a Fixed Input Price Sources

 Competitive

market is the commercial environment where the producer doesn't have the power to determine the price. It is the market that determines the price because there is no monopoly or oligopoly, however, the quality of your product or lower the price will become competitive because the factor "preference" of consumers.

 Like

the market demand curve, the market supply curve is just the sum of the quantities supplied by each seller at each market price. supply, thus reflects the marginal costs of each of the producers in the market.

Market

 In

markets where there are many identical sellers of a homogenous product, it is important to distinguish between the "short run" and "long run" supply curves. We have been talking about the "short run" supply curve because some factors were variable (labor) and some were fixed (space, managerial time).

 The

long run supply curve measures the quantities of a good or service offered for sale by all sellers--potential and actual-who could sell in the market. Long run supply is more elastic than short run supply.

 The graph shows the short run and long run supply curves for New York State apples. The short run curve is 1,700 (current number of farms) times the supply of a typical apple farm. Long run supply is horizontal at $400/ton (economic profits = 0)

variable input is one that can be adjusted in the short run. For the apple farm example above, hired labor is the only variable input. We are going to analyze the effects of increasing the price of a variable input on the short and long run supply curves in a competitive product market.

 When

the price of a variable input increases:

Marginal cost increases for every firm. Average total cost increases for every firm. Minimum ATC increases for every firm. Short run industry supply decreases, shifts to the left.

The

long run industry supply curve shifts to a line infinitely elastic at the new, higher minimum ATC.

 The graph, once again, shows the entire market. The new short run supply curve, the sum of the MC curves for all currently operating firms, is above and to the left of the original supply curve. The new long run supply is infinitely elastic at the price equal to the minimum ATC for the new input prices.

fixed input is one that cannot be adjusted in the short run. the apple farm example, land and the proprietors time are both fixed inputs.

In

 The graph, once again, shows the entire market, with the initial position shown in the curves we used above. The short run supply curve, the sum of the MC curves for all currently operating firms, does not change. The new long run supply is infinitely elastic at the price equal to the minimum ATC for the new input prices.

http://www.colorado.edu/economics/morey/2010/2 010BookChapters/KW_Chapter9/KWCh_09_The_I ndustry_Supply_Curve_Edward.pdf http://tutor2u.net/economics/content/topics/competi tion/competition.htm http://www.michaeljonas.com.br/meu%20trabalho/f bb_grad/Economia%20I/Ch14%20Empresas%20e m%20Mercados%20Competitivos.pdf http://economicsconcepts.com/short_run_equilibriu m_of_the_price_taker_firm.htm http://www.notapositiva.com/dicionario_economia/ precomercado.htm