Thread: Understanding Lunia Economy View Single Post
 10-23-2009 #26 (permalink) sentythee ggFTW Stalker   Join Date: Jul 2007 Location: In reckless abandon, I follow the Turtle. Posts: 520 iTrader: (0) Guild: Titans MR is marginal revenue (amount of profit that can be gained by selling 1 extra unit) MC is marginal cost (cost of selling 1 extra unit) ATC is average total cost He implicitly made the y-axis "Price" S is supply D is demand Q is quantity I don't think the first set of graphs shows anything not covered by the second set. Even in the second set, only the second graph is needed to make the point. So I'll just explain the second graph. The positively-sloped graph is supply. Positively sloped = as price goes up, quantity produced goes up. The negatively-sloped graph is demand. Negatively sloped = as price goes up, quantity bought goes down. Where the two lines meet is the market equilibrium --> the most people benefit from that specific price and quantity produced/bought. The price will not budge unless something changes in the buyers or sellers. When a new character comes out, people want keys for CS. This increases demand, so the demand line moves along the positive x-axis (because x-axis represents quantity). Look at the new point where the two lines meet: it moves up (positive y-axis, and y-axis represents price) and to the right (positive x-axis, x is quantity). That means amount produced/bought increases, and price increases. That's all .-. Spoiler for fun and profit Spoiler! Phuc's third set is actually incorrect. If the only reason for the increase in supply is the increase in price, then the new sellers will flee the market just as quickly as they entered when the price goes back down. This would cause the price to increase again, which means the new low price was never an equilibrium. This is also why you only take one step for every change in a variable in the equation. In the graph, the supply line implicitly carries the number of people that will enter the market from an increase in price. When you shift the demand curve, it's understood that the new equilibrium point contains the new sellers that will enter the market. __________________ ] Last edited by sentythee; 10-23-2009 at 05:43 PM.