supply-and-demand - BASIC ECONOMICS The Basic Principles...

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BASIC ECONOMICS The Basic Principles Basic Economics - Introduction Production Possibilities Frontier Supply and Demand Theory of Consumer Choice Elasticity of Supply and Demand Tax & Market Failure Price Controls and Tax Efficiency of Markets Tax and Deadweight Loss International Business and Trade Market Failures and Externalities Market Structures Costs and Production Perfect Competition Monopoly Companies Oligopoly Market Structure Monopolistic Competition Supply and Demand A market is defined as a group of buyers and sellers of a particular product or service. Competitive markets are markets with many buyers and sellers, so that each has a very small influence on the price. Supply and demand is the most useful model for a competitive market, and shows how buyers (citizens) and sellers (businesses) interact in that market. Quantity Demanded & Supplied The demand for a product is the amount that buyers are willing and able to purchase. Quantity demanded is the demand at a particular price, and is represented as the demand curve. The supply of a product is the amount that producers are willing and able to bring to the market for sale. Quantity supplied is the amount offered for sale at a particular price. The main determinant of supply/demand is the price of the product. Law of Demand The Law of Demand states that other things held constant, as the price of a good increases, the quantity demanded will fall. Other factors that can influence demand include: 1. Income - Generally, as income increases, we are able to buy more of most goods. When demand for
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a good increases when incomes increase, we call that good a "normal good". When demand for a good decreases when incomes increase, then that good is called an inferior good . 2.
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This note was uploaded on 11/04/2009 for the course MNY 111 taught by Professor Various during the Spring '09 term at Southern Illinois University Edwardsville.

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supply-and-demand - BASIC ECONOMICS The Basic Principles...

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