BA_315_LN_3_Demand_and_Supplyk

BA_315_LN_3_Demand_and_Supplyk - 1 Demand Supply and Market...

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Unformatted text preview: 1 Demand, Supply and Market Equilibrium Lecture Notes #3 BA 315: Economy, Industry, and Competitive Analysis Source: Schiller Chapter 3 Edited by Ali Emami Department of Finance Charles H. Lundquist College of Business University of Oregon 2 Demand, Supply and Market Equilibrium This lecture is an introduction to market behavior and the shows how the market system provides answers the basic questions of WHAT, HOW, and FOR WHOM. This introduction illustrates how the market system answers the following questions: 1. What determines the price of a good or a service? 2. How does the price of a product affect its production and consumption? 3. Why do prices and production levels often change? Concepts you will learn Market Demand Curve Market Surplus Factor Market Law of Demand Market Shortage Product Market Ceteris Paribus Price Ceiling Barter Shift in Demand Price Floor Supply Market Demand Government Failure Demand Market Supply Laissez Faire Opportunity Cost Law of Supply Market Mechanism Demand Schedule Equilibrium Price 3 LECTURE OUTLINE I. Introduction A. Market f Definition : Market- Any place where goods and services (non-financial or financial) are bought or sold. Markets may have a geographical place or may be over the counter (OTC). II. Market Participants A. Market participants consists of four groups of households, businesses, local government, and foreigners. Over 280 million individual consumers, about 20 million business firms, and tens of thousands of government agencies participate directly in the U.S. economy. Millions of foreigners also participate by buying and selling goods in American markets. B. Goals of Market Participants 1. Consumers - maximize happiness or satisfaction (utility) from consumption of goods and services. 2. Businesses - maximize profits. 3. Government - maximize general welfare of society. C. Constraints 1. All market participants have limited resources. 2. Consumers need to make choices from available products given their limited income. 3. Producers must choose how to best ( optimize ) use their limited resources ( inputs ) to produce maximum output. 4. Government must also decide how best to use its limited resources. D. Specialization and Exchange – 1. Why do we participate in exchange (trade)? a. We are incapable of producing all that we desire. b. We have limited amount of time, energy, and resources. c. Specialization increases total output. Example - If each student were to move to the country, can they be self-sufficient? In other words, could they make all their own clothing, grow their own food, build and provide their own transportation. If they cannot, what will happen to their quality of life or standard of living?...
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This note was uploaded on 04/22/2008 for the course ECON 315 taught by Professor Aliemami during the Spring '08 term at Oregon.

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BA_315_LN_3_Demand_and_Supplyk - 1 Demand Supply and Market...

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