Chapter4 - Chapter 4 The Market Forces of Supply and Demand...

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Chapter 4: The Market Forces of Supply and Demand Markets and Competition 1. What Is a Market? a. Market: group of buyers and sellers of a particular good or service b. Most often, markets are less organized b.i. Example: Buyers and sellers of ice cream in a town- they do not meet together at any one time, regardless they are closely connected 2. What Is Competition? a. Price and quantity are determined by all buyers and sellers as they interact in the marketplace b. Competitive market: a market in which there are many buyers and many sellers so that each has a negligible impact on the market price c. Perfectly Competitive: c.i. The goods offered for sale are all exactly the same c.ii. The buyers and sellers are so numerous that no single buyer or seller has any influence over the market price c.iii. Price takers: must accept the price the market determines d. Monopoly: One seller, seller sets the price e. Some degree of competition is present in most markets Demand 3. The Demand Curve: The Relationship between Price and Quantity Demanded a. Quantity demanded: the amount of a good that buyers are willing and able to purchase a.i. Example: Q.D. depends on price of the good b. Law of demand: the claim that, other things equal, the quantity demanded of a good falls when the price of the good rises c. Demand Schedule: a table that shows the relationship between the price of a good and the quantity demanded d. Demand Curve: a graph of the relationship between the price of a good and the quantity demanded (downward-sloping line relating price and
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Chapter4 - Chapter 4 The Market Forces of Supply and Demand...

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