Unformatted text preview: EC 151 Ch: 4 The market forces of Supply & Demand
Markets & Competition Demand Supply Equilibrium Markets & Competition Market (buyers & sellers) Forms of market: competitive markets perfectly competitive markets monopoly oligopoly monopolistically competitive markets Demand = D Quantity demanded = QD vs. D Law of Demand Demand Schedule Demand Curve Market Demand vs. individual Demand Shifts in the Demand curve Price = P (not a shift) Income = y normal good inferior good P of related goods substitute complements Tastes Expectations Number of buyers Supply = S Quantity Supplied = QS vs. S Law of Supply Supply schedule Supply Curve Market Supply vs. Individual Supply Shifts in the Supply curve P (not a shift) Input P Technology Expectations Number of Sellers Natural disasters S, D, & Equilibrium Equilibrium Equilibrium P Equilibrium Q Surplus Shortage Law of S & D 3 steps to analyzing changes in equilibrium:
1. 2. 3. Decide whether the event shifts the S or D curve (or both) Decide which direction the curve shifts. Use the S & D diagram to see how the shift changes the equilibrium P and Q Start to see how markets operate P determines who and how much good is produced P is a tool that invisible hand uses Conclusion: How P allocate resources ...
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