Microeconomics Notes

Microeconomics Notes - Microeconomics Notes A market is a...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Microeconomics Notes A market is a group of buyers and sellers of a particular good or service. The terms supply and demand refer to the behavior of people as they interact with one another in markets. Perfect Competition o Products are the same o Numerous buyers and sellers so that each has no influence over price o Buyers and sellers are price takers Monopoly o One seller, and seller controls price Oligopoly o Few sellers o Not always aggressive competition Monopolistic Competition o Many sellers o Slightly differentiated products o Each seller may set price for its own product Demand o Quantity demanded is the amount of a good that buyers are willing and able to purchase. o Law of Demand The law of demand states that, other things equal, the quantity demanded of a good falls when the price of the good rises There is a negative relationship between price and quantity demanded. o Change in Quantity Demanded Movement along the demand curve. Caused by a change in the price of a product. o Change in Quantity Demanded VS. Change in Demand Change in Demand A shift in the demand curve, either to the left or right Caused by any change that alters the quantity demanded at every price such as: o Consumer income o Prices of related goods o Tastes o Expectations o Number of buyers When there is an increase in income, the price remains constant, and the demand will rise.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Consumer income As income increases the demand for a normal good will increase. As income increases the demand for an inferior good will decrease. Prices of related goods When a fall in the price of one good reduces the demand for another good, the two goods are called substitutes. When a fall in the price of one good increases the demand for another good the two goods are called complements . Quantity Supplied is the amount of a good that sellers are willing and able to sell The Law of supply States that other things equal, the quantity supplied of a good rises when the price of the good rises. Supply schedule A table that shows the relationship between the price of the good and the quantity supplied. (Supply Curve) There is a positive relationship between price and quantity supplied. Market supply refers to the sum of all individual supplies for all sellers of a particular good or service. Graphically, individual supply curves are summed horizontally. Change in quantity supplied Movement along the supply curve Caused by a change in anything that alters the quantity supplied at each price. Demand Curve o Law of demand o Change in quantity demanded (Movement along the line) o Change in demand (Shift of the line) o Change in quantity demanded refers to movement along the line, which is caused by change in prices of the particular good. o
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/14/2008 for the course ECON 2100 taught by Professor Mishra during the Spring '08 term at Western Michigan.

Page1 / 16

Microeconomics Notes - Microeconomics Notes A market is a...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online