Chapter%204.1 - CHAPTER 4 CHAPTER MARKET FORCES OF SUPPLY...

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CHAPTER 4 CHAPTER 4 MARKET FORCES OF SUPPLY AND MARKET FORCES OF SUPPLY AND DEMAND DEMAND
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KEY IDEAS What factors affect buyers’ demand for goods? What factors affect sellers’ supply of goods? How do supply and demand determine the price of a good and the quantity sold? How do changes in the factors that affect demand or supply affect the market price and quantity of a good? How do markets allocate resources?
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Markets and Competition A market is a group of buyers and sellers of a particular good or service. A competitive market is one in which there are so many buyers and so many sellers that each has a negligible impact on the market price. A perfectly competitive market: all goods are exactly the same buyers & sellers so numerous that no one can affect the market price – each is a “ price taker we assume markets are perfectly competitive. 0
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Demand Demand comes from the behaviour of buyers. The quantity demanded of any good is the amount of the good that buyers are willing and able to purchase. Law of demand : other things equal, the quantity demanded of a good falls when the price of the good rises. 0
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The Demand Schedule Demand schedule : A table that shows the relationship between the price of a good and the quantity demanded. Example: Helen’s demand for good Z 0
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The Demand Schedule Price of good Z Quantity of Z demanded $0.00 16 1.00 14 2.00 12 3.00 10 4.00 8 5.00 6 6.00 4 0
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$0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 0 5 10 15 Price of good Z Quantity of good Z Helen’s Demand Curve 0
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Market Demand versus Individual Demand Market demand is the sum of the quantities demanded by all buyers at each price. If Helen and Ken are the only two buyers in the market. ( Q d = quantity demanded) 4 6 8 10 12 14 16 Helen’s Q d 2 3 4 5 6 7 8 Ken’s Q d 6 9 12 15 18 21 24 Market Q d $0.00 6.00 5.00 4.00 3.00 2.00 1.00 Price 0
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$0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 0 5 10 15 20 25 P Q The Market Demand Curve for Good Z   0
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Demand Curve Shifters The demand curve shows how price affects quantity demanded, other things being equal . These “other things” are non-price determinants of
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This note was uploaded on 01/27/2011 for the course ECON 1000 taught by Professor Ayhoo during the Spring '10 term at California Coast University.

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Chapter%204.1 - CHAPTER 4 CHAPTER MARKET FORCES OF SUPPLY...

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