econ ch. 3 - SUPPLY AND DEMAND: A MODEL OF A COMPETITIVE...

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1 SUPPLY AND DEMAND: A MODEL OF A COMPETITIVE MARKET -market - a group of sellers ad buyers that constitute a particular type of market, known as a competitive market - a COMPETITIVE MARKET is a market in which there are many buyers and sellers of the same good or service -no individuals actions have a noticeable effect on the price at which the good or service is sold -the SUPPLY AND DEMAND MODEL is a model of how a competitive market works THE DEMAND CURVE - the higher the price, the fewer people who want to buy the good; the lower the price, the more people who want to buy the good - a DEMAND SCHEDULE shows how much of a good or service consumers will want to buy at different prices -a DEMAND CURVE is a graphical representation of the demand schedule. It show how much of a good or service consumers want to buy at any given price -the QUANTITY DEMANDED is the actual amount consumers are willing to buy at some specific price - a higher price reduces the number of people willing to buy a good - in the real world, demand curves almost always, with some very specific exceptions do slope downward. - the exceptions are called “giffen goods” -the LAW OF DEMAND says that a higher price for a good, other thins equal, leads people to demand a smaller quantity of a good - a SHIFT OF THE DEMAND CURVE is a change in the quantity demanded at any given price, represented by the change of the original demand curve to a new positition, denoted by a new demand curve - a MOVEMENT ALONG THE DEMAND CURVE is a change in the quantity demanded of a good that is the result of a change in that good’s price - increase in demand = rightward shift of demand curve - decrease in demand = leftward shift of demand curve - an increase in demand does not equal an increase in quantity - 4 principle factors shift the demand curve for a good 1. Changes in the prices of related goods 2. Changes in income 3. Changes in tastes 4. Changes in expectations - when we said before that the quantity of a good demanded falls as its price rises, other things equal, we were referring to the factors that shift demand as remaining unchanged CHANGES IN THE PRICES OF RELATED GOODS - two goods are SUBSTITUTES if a fall in the price of one of the goods makes consumers less willing to buy the other good
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This note was uploaded on 04/17/2008 for the course IBEC 201 taught by Professor Liu during the Winter '08 term at Ohio Northern University.

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econ ch. 3 - SUPPLY AND DEMAND: A MODEL OF A COMPETITIVE...

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