14.1 R.lucas Supply Function P AS Summation of supply of different markets in Microeconomic As Curve of aggregate supply in Macroeconomics, while sumn demands of different is AD Curve of aggregate demand and the cro The two curves is equilibrium point of national economy e AD Y 复且学经济学院
14.1 R.lucas Supply Function Y AD AS Summation of supply of different markets in Microeconomics, is AS Curve of aggregate supply in Macroeconomics, while summation of demands of different is AD Curve of aggregate demand. And the crossed point of The two curves is equilibrium point of national economy. P Y* P e
14.1 R.lucas Supply Function R.lucas Supply Function O Explanation One: Output and prices are determined by both supply and demand, and the corresponding P and Y of point e are price and output O Explanation TWO: When supply and demand are already given in each market, there must be a price P which ensures that supply of one market can satisfy its demand. This is the concept of market clearing. In fact, if economy is constituted by n different markets, and only the previous n-1 market can realize equilibrium of supply and demand, the supply and demand of last market will realize equilibrium. And this is the concept of Walras's Laws 复济院
14.1 R.lucas Supply Function v R.lucas Supply Function ¤Explanation One：Output and prices are determined by both supply and demand, and the corresponding P and Y* of point e are price and output. ¤Explanation Two：When supply and demand are already given in each market, there must be a price P which ensures that supply of one market can satisfy its demand. This is the concept of market clearing. In fact, if economy is constituted by n different markets, and only the previous n-1 market can realize equilibrium of supply and demand, the supply and demand of last market will realize equilibrium. And this is the concept of Walras’s Laws
14.1 R.lucas Supply Function R. lucas Supply Function o If we presume that gross supply of Whole economy is constituted by on the same corporations, we only need to choose one corporation to research the supply curve, and then we make results timed n to get Aggregate Supply of whole economy. 复且学经济学院
14.1 R.lucas Supply Function vR.lucas Supply Function ¤ If we presume that gross supply of whole economy is constituted by on the same corporations , we only need to choose one corporation to research the supply curve, and then we make results timed N to get Aggregate Supply of whole economy
14.1 R.lucas Supply Function r is the potent or normal S output of representative corporation, if it believes price of r' is bigger than P, he will hold beliefs that expansion of producing can bring profit, so r will increase to y P=P If potent output of the whole economy is Y, the optimal output for Corporation /is YN, Y And then price of this corporation is presumed pi, and once we distract one microcosmic corporation from the whole supply, we will find out that market is actually decentralized Y 复济院
14.1 R.lucas Supply Function Si If potent output of the whole economy is Y* , the optimal output for Corporation I is Y*/N,(Y* i). And then price of this corporation is presumed Pi，and once we distract one microcosmic corporation from the whole supply, we will find out that market is actually decentralized Yi P P’’ i Yi ’’ Pi=P Y* i P’ i Y* is the potent or normal output of representative corporation，if it believes price of Y’ is bigger than P , he will hold beliefs that expansion of producing can bring profit, so Y*I will increase to Y’i。 Yi ’