Lesson 3 - Markets: Supply

An Overview of Lesson 3

In the previous lesson, we described and defined the demand curve, which relates prices and quantities on the consumption side of the market. In this lesson, we will learn about supply curves, which define the relationship between price and quantity on the producing side of the market. When we have done so, we will put the two curves together, which will give us the "supply and demand" diagram, the basic tool of analysis for every question in market economics.

What will we learn?

By the end of this lesson, you should be able to:

• describe the differences between fixed, variable, average, and marginal costs;
• understand the difference between "accounting" and "economic" profits;
• describe risk-free returns and risk premiums;
• define what is meant by "long-run" and "short-run," and what the difference between them is;
• draw a supply and demand diagram, and identify the equilibrium point;
• list and describe the assumptions of perfectly competitive markets.

What is due for Lesson 3?

This lesson will take us one week to complete. Please refer to the Calendar in Canvas for specific time frames and due dates. There are a number of required activities in this lesson. The chart below provides an overview of those activities that must be submitted for this lesson. For assignment details, refer to the lesson page noted.