lecture_2 - Market a place where buyers and sellers of a...

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ECON 1001 LECTURE 2 1 Market - a place where buyers and sellers of a particular good or service meet Competitive market - many buyers and sellers that each has a negligible impact on the market price Perfect competition - (a) the good offered by the firms is homogeneous (b) no buyer or seller can influence price market participants are price takers Quantity demand is the amount of a good buyers are willing and able to purchase
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ECON 1001 LECTURE 2 2 Demand Demand curve - a graph of the relationship between the price of a good and the q demanded Law of demand - quantity demanded of a good falls when the price rises Determinants of demand: - price of good - income (normal goods, inferior goods) - prices of related goods (substitutes, complements) - tastes - expectations
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ECON 1001 LECTURE 2 3 Price of an ice cream Quantity of ice creams demanded $0.00 12 0.50 10 1.00 8 1.50 6 2.00 4 2.50 2 3.00 0 Demand schedule assumes only price of that good changes - everything else is held constant (income, other prices, etc) ceteris paribus - ‘other things equal’
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ECON 1001 LECTURE 2 4 Price Quantity Catherine’s demand for ice cream 3.00 1.50 6 12
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ECON 1001 LECTURE 2 5 Market demand - individual demand curves summed horizontally . It shows how total q demanded varies with price of the good Like individual curves, market demand holds everything constant but the price of the relevant good Price Catherine Nick Market 0.00 12 7 19 0.50 10 6 16 1.00 8 5 13 1.50 6 4 10 2.00 4 3 7 2.50 2 2 4 3.00 0 1 1
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ECON 1001 LECTURE 2 6 Price Quantity Market demand for ice cream 3.00 1.50 6 12 7 1 2.00 D C D N 19 D M Market demand is the horizontal sum of all individual demands Here: D M = D C + D N More generally: D M = Σ D i
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ECON 1001 LECTURE 2 7 Shifts in demand v shifts along the demand curve Variable A change in this variable … Price movement along the demand curve Income Shifts the demand curve Price of related goods Shifts the demand curve Tastes Shifts the demand curve Expectations Shifts the demand curve Number of buyers Shifts the demand curve Demand curve shows q demanded when price s, holding all other factors constant. When one of these other factors s, demand curve shifts
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ECON 1001 LECTURE 2 8 Shift in demand - an increase in demand Price Quantity D 0 D 1
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ECON 1001 LECTURE 2 9 Quantity Price Decrease in demand D 0 D 1
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ECON 1001 LECTURE 2 10 Supply Quantity supplied - the amount of a good that sellers are willing and able to sell The determinants of individual supply - price - input prices - input prices - technology - expectations Law of supply - other things equal the q supplied will rise when the price rises
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11 Supply curve - a graph of the relationship between the price of a good and the q supplied. Price
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This note was uploaded on 11/06/2011 for the course ECMT 1010 taught by Professor Vadimtimovsky during the Three '10 term at University of Sydney.

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lecture_2 - Market a place where buyers and sellers of a...

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