CHAPTER 4THE MARKET FORCES OF SUPPLY AND DEMAND89“—and seventy-five cents.”“Two dollars.”◆Economists use the model of supply and demand to analyze competitive markets. In a competitivemarket, there are many buyers and sellers, each of whom has little or no influence on the market price.◆The demand curve shows how the quantity of a gooddemanded depends on the price. According to the lawof demand, as the price of a good falls, the quantitydemanded rises. Therefore, the demand curve slopesdownward.◆In addition to price, other determinants of the quantitydemanded include income, tastes, expectations, and the prices of substitutes and complements. If one ofthese other determinants changes, the demand curveshifts.◆The supply curve shows how the quantity of a goodsupplied depends on the price. According to the law ofsupply, as the price of a good rises, the quantitysupplied rises. Therefore, the supply curve slopesupward.
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