Economics 20th Edition by Campbell McConnell ,Stanley Brue ,Sean Flynn

Exercise 4

Using diagrams for both the industry and a representative firm, illustrate competitive equilibrium. Assuming constant costs, empthese diagrams to show how ( a ) an increase and ( b ) a decrease in market demand will upset that equilibrium. Trace graphically and describe verbally the adjustment processes by which equilibrium is restored. Now rework your analysis for increasing and decreasing-cost industries and compare the three supply curves.