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macronotes

# macronotes - 9/17-handout 1 Markets and their role Product1...

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9/17-handout 1. Markets and their role Product 1. Determine Prices of Products 2. Ration (Allocate) Products Resource 1. Determine Price of Resources 2. Ration (Allocate) Resources 2. Demand from Buyers Demand Schedule Demand -a schedule which shows the various amounts of a product which consumers are willing and able to purchase at each specific price in a set of possible prices during some specific period of time An individual Buyer’s Demand for Corn (hypothetical data) Price per bushel Quantity demanded per week \$5↓ 10 15 4 20 25 3 35 40 2 55 60 1 80 85 Note: high price=few units sold; low price=more units sold; inverse relationship However if Price ∆es from \$5 to \$4 there has been a ∆ in quantity demanded, i.e. you are now exercising your option to consume more b/c P↓ Law of Demand: price and quantity are inversely related (graph) Determinants of Demand (Determines Location of Demand Curve) 1. tastes or preferences of individuals 2. # of consumers (market Demand) 3. money income 4. price of related goods 5. consumer expectations Note: 1-4=individual D c & 5=Market D c Change in Demand change in one or more of the 5 determinants thus shifting the whole demand schedule (graph) D rightward shift (i.e. D 1 to D 2 ) D leftward shift (i.e. D 1 to D 3 ) Change in Quantity Demanded a change in the price of the product and results in a movement along the curve (e.g. \$4—20, \$3—35) Market Demand Market demand for corn, three buyers (hypothetical data) Price Quantity Quantity Quantity Total per demanded demanded demanded Quantity bushel first buyer second buyer third buyer per week \$5 10 +12 +8 =30 4 20 +23 +17 =60 3 35 +39 +26 =100 2 55 +60 +39 =154 Markets (using the forces of S & D) Now buy more b/c let’s say income increases shift D c

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1 80 +87 +54 =221 Market Demand=∑(individual D c ’s) the sum of individual demands for a product market (graphs) Market demand for corn, 200 buyers (hypothetical data)__________________________ (1) (2) (3) (4) Price Quantity # of buyers Total per demanded in the quantity bushel per week, market demanded single buyer per week \$5 10 X200 =2,000 4 20 X200 =4,000 3 35 X200 =7,000 2 55 X200 =11,000 1 80 X200 =16,000 3. Supply from Sellers Supply Schedule Supply - a schedule which shows the various amounts of a product which a producer is willing and able to produce and make available for sale in the market at each specific price in a set of prices during some specific period of time Law of Supply: price of quantity are positively related An individual producer’s supply of corn (hypothetical data) (graph) Price per bushel Quantity supplied per week \$5 60 4 50 3 35 2 20 1 5 Note: direct relationship between P & Q; gov’t rationing: ex. low income housing Determinants of Supply (i.e. Location of Supply Curve) 1. techniques of production 2. prices of resources & taxes 3. prices of other products 4. price expectations 5. # of sellers on the market 6. change in the # of sellers in the market Note: 1-4=individual S c Change in Supply change in one or more of the 6 determinants thus shifting the whole supply schedule (graph) ↑S rightward shift (i.e S 1 to S 2 ) ↓S leftward shift (i.e S 1 to S 3
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