Lecture_2 - MARKETS AND COMPETITION Supply and demand are...

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MARKETS AND COMPETITION 0. Supply and demand are the two words that economists use most often. 1. Supply and demand are the forces that make market economies work. 2. Modern microeconomics is about supply, demand, and market equilibrium. What Is a Market? 3. A market is a group of buyers and sellers of a particular good or service. 4. The terms supply and demand refer to the behavior of people . . . as they interact with one another in markets. 5. Buyers determine demand . 6. Sellers determine supply. You could also say that households are the buyers and the farms are the suppliers in a goods market. Also need to consider the price of good What Is Competition? 7. A competitive market is a market in which there are many buyers and sellers so that each has a negligible impact on the market price. What Is Competition? 8. Competition: Perfect and Otherwise 0. Perfect Competition 0. Products are the same 1. Numerous buyers and sellers so that each has no influence over price 2. Buyers and Sellers are price takers-buyers can’t control the price 1. Monopoly 3. One seller, and seller controls price What Is Competition? 9. Competition: Perfect and Otherwise 2. Oligopoly 4. Few sellers 5. Not always aggressive competition 3. Monopolistic Competition 6. Many sellers 7. Slightly differentiated products
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8. Each seller may set price for its own product DEMAND 10. Quantity demanded is the amount of a good that buyers are willing and able to purchase. Actual point on the demand curve. Demand is the curve 11. Law of Demand 0. The law of demand states that, other things equal, the quantity demanded of a good falls when the price of the good rises. The Demand Curve: The Relationship between Price and Quantity Demanded 12. Demand Schedule 4. The demand schedule is a table that shows the relationship between the price of the good and the quantity demanded. Catherine’s Demand Schedule The Demand Curve: The Relationship between Price and Quantity Demanded 13. Demand Curve 5. The demand curve is a graph of the relationship between the price of a good and the quantity demanded. Price goes on the vertical axis, quantity goes on the horizontal axis Figure 1 Catherine’s Demand Schedule and Demand Curve Market Demand versus Individual Demand 14. Market demand refers to the sum of all individual demands for a particular good or service. 15. Graphically, individual demand curves are summed horizontally to obtain the market demand curve. The Market Demand Curve Shifts in the Demand Curve 16. Change in Quantity Demanded 6. Movement along the demand curve happens when there is a change is price. -The quantity demanded changes Changes in Quantity Demanded Shifts in the Demand Curve 7. Consumer income
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8. Prices of related goods 9. Tastes 10.Expectations 11.Number of buyers Shifts in the Demand Curve 17. Change in Demand 12.A shift in the demand curve, either to the left or right. 13.Caused by any change that alters the quantity demanded at
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This note was uploaded on 05/04/2009 for the course ECON 202 taught by Professor Amsler during the Spring '08 term at Michigan State University.

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Lecture_2 - MARKETS AND COMPETITION Supply and demand are...

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