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Ch 4 Market Forces of Supply and Demand bb

Ch 4 Market Forces of Supply and Demand bb - Chapter 4...

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Copyright © 2006 Nelson, a division of Thomson Canada Ltd. Chapter 4 Market Forces of Supply & Demand
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Copyright © 2006 Nelson, a division of Thomson Canada Ltd. Markets 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. 
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Copyright © 2006 Nelson, a division of Thomson Canada Ltd.   Buyers (consumers) determine  demand . Sellers (firms, producers, suppliers) determine  supply . .
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Copyright © 2006 Nelson, a division of Thomson Canada Ltd. Market   demand  refers to the sum of all  individual demands for a particular good or  service. Market   supply  refers to the sum of all individual  supplies of a particular good or service.
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Copyright © 2006 Nelson, a division of Thomson Canada Ltd. There are different types of market structures. 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.  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 In this chapter, we assume markets are perfectly  competitive.
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Copyright © 2006 Nelson, a division of Thomson Canada Ltd. Demand Quantity   demanded ,   Qd   is the amount of a  good or service that consumers are willing  and able to buy at a given price, P. When the price of a good increases, you buy  less of that good.  We say price and Qd are negatively related.  As  P   ,  Qd 
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Copyright © 2006 Nelson, a division of Thomson Canada Ltd. The Law of Demand    Other things being equal ( ceteris paribus) when the price of a good rises, the quantity  demanded of that good falls.
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Copyright © 2006 Nelson, a division of Thomson Canada Ltd. Other Determinants of Demand Income 1. When income increases and you buy more of a  good, this good is a  normal   good   (or if income  falls and you buy less). 2. When income increases and you buy less of a  good, this good is an  inferior   good  (or if income  falls and you buy more).
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Copyright © 2006 Nelson, a division of Thomson Canada Ltd. Most goods are normal goods. Examples of  inferior goods include Kraft Dinner (as your  income increases, you don’t have to eat KD  anymore- you can afford steak) and bus rides (as  income increases, you can take a cab or buy a  car).
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Copyright © 2006 Nelson, a division of Thomson Canada Ltd.
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