chapter 4 - Chapter 4 Markets and Competition A market A...

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1 CHAPTER 4 THE MARKET FORCES OF SUPPLY AND DEMAND 0 Chapter 4 Markets and Competition ± A market ± A competitive market ± A perfectly competitive market: CHAPTER 4 THE MARKET FORCES OF SUPPLY AND DEMAND 1 Demand ± The quantity demanded ± Law of demand : CHAPTER 4 THE MARKET FORCES OF SUPPLY AND DEMAND 2 The Demand Schedule ± Demand schedule : ± Example: Helen’s demand for lattes. 16 $0.00 4 6.00 6 5.00 8 4.00 10 3.00 12 2.00 14 1.00 Quantity of lattes demanded Price of lattes ± the Law of Demand
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2 CHAPTER 4 THE MARKET FORCES OF SUPPLY AND DEMAND 3 $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 05 1 0 1 5 Price of Lattes Quantity of Lattes Helen’s Demand Schedule & Curve 16 $0.00 4 6.00 6 5.00 8 4.00 10 3.00 12 2.00 14 1.00 Quantity of lattes demanded Price of lattes Market Demand versus Individual Demand ± The quantity demanded in the market is the sum of the quantities demanded by all buyers at each price. ± Suppose Helen and Ken are the only two buyers in the Latte market. ( Q d = quantity demanded) 4 6 8 10 12 14 16 Helen’s Q d 2 3 4 5 6 7 8 Ken’s Q d + + + + = = = = 6 9 12 15 += 18 21 24 Market Q d $0.00 6.00 5.00 4.00 3.00 2.00 1.00 Price CHAPTER 4 THE MARKET FORCES OF SUPPLY AND DEMAND 5 $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 0 5 10 15 20 25 P Q The Market Demand Curve for Lattes 24 $0.00 6 6.00 9 5.00 12 4.00 15 3.00 18 2.00 21 1.00 Q d (Market) P
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3 CHAPTER 4 THE MARKET FORCES OF SUPPLY AND DEMAND 6 Demand Curve Shifters ± The demand curve shows how price affects quantity demanded, other things being equal .
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This note was uploaded on 02/25/2008 for the course ECON 002 taught by Professor Mahalingam during the Fall '07 term at UC Riverside.

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chapter 4 - Chapter 4 Markets and Competition A market A...

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