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If the price of pizza goes up what
happens to the SUPPLY of pizza? NOTHING!
A change in the price of a product
does not affect its supply, or its demand. When the price
goes up the QUANTITY SUPPLIED will increase, but the supply
does not change. Learn the difference between "supply" and
"quantity supplied". "Supply" does NOT MEAN the quantity
available for sale. Supply has a different definition in
economics. "Supply" means the "Supply graph".
So what would cause the supply graph,
or supply itself, to change? Those things that cause supply
to change are called the "non-price determinants of supply".
They are: Pe, Pog, Pres, Tech, Tax, Nprod or "PPPTTN". See
the Yellow Pages.
Remember, the goal of chapter 3 is to
learn a model that will help us understand why prices are
what they are and why they change. In the next lesson we
will put demand and supply together and use the model
(graph) to find the prices of products. Then, and more
importantly, we will see what causes prices to change.
After completing this chapter, if you
hear on the news, or read in your news app, that the price
of gasoline is going down, we will be able to explain WHY.
The causes of changes in prices of products are the five
non-price determinants of demand (Pe, Pog, I, Npot, T)
and/or the six non-price determinants of supply (Pe, Pog,
Pres, Tech, Tax, Nprod.). Whenever you hear that the price
of something is changing think of these 11 possible
causes.
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