Sept 17 ECO 1104 LEC – Supply and Demand

Sept 17 ECO 1104 LEC – Supply and Demand -...

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Demand Markets and competition Supply and demand are the forces that make market economies work. Modern microeconomics is about supply, demand, and market equilibrium. A market is a group of buyers and sellers of a particular good or service The terms supply and demand refer to the behavior of people as they interact with one another in markets. Buyers determine demands Sellers determine supply Examples: eBay, Downtown Ottawa Competition Characteristics of a perfectly competitive market: The goods being offered for sale are all the same The buyers are sellers are so numerous that no one can influence the market price Price Takers Other forms of market: Monopoly: one seller Oligopoly: only a few seller Monopolisitc competition: large number of sellers but products are slightly different The Demand Curve Quantity demanded: the amount of a good that buyers are willing to purchase. Negatively related to price demand curve is downward sloping Law of demand: The claim that, other things equal, the quantities demanded of a good falls when the price of the good rises Change in the price movements along the curve Example: Demand schedule (cookies example, downward slope) and demand curve Market demand vs. individual demand Market demand refers to the sum of all individual demands for a particular good or service Graphically, individual demand curves are summed horizontally to obtain the market demand curve. Change in Quantity Demanded
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Sept 17 ECO 1104 LEC – Supply and Demand -...

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