Chapter 4 Powerpoint

Chapter 4 Powerpoint - The Market Forces of Supply and...

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The Market Forces of Supply and Demand (Review of Microeconomics) Chapter 4
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2 The Market Forces of Supply and Demand A market is a group of buyers and sellers of a particular good or service. (computer mkt, labor mkt, legal service mkt. .) Supply and demand are the forces that make market economies work. Supply and demand determines the equilibrium of market (equilibrium quantity and equilibrium price) Modern microeconomics is about supply, demand, and market equilibrium.
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3 Markets Buyers determine demand . Sellers determine supply . They determine the equilibrium of market together.
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4 Market Type: 1. A Competitive Market Products are the same Numerous buyers and sellers so that each has no influence over price Buyers and Sellers are price takers (Agricultural products, like rice, milk etc) Perfect Competition
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5 Market Type: 2. Less Competitive Markets Monopoly One seller, and seller controls price (Microsoft, AT&T, and etc) Oligopoly Few sellers Not always aggressive competition (Gas, Automobile etc)
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6 Market Type: 2. Less Competitive Markets Monopolistic Competition Many sellers Slightly differentiated products Each seller may set price for its own product (almost all products)
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7 Major Determinants of Demand Market price Consumer income Prices of related goods Tastes Expectations Can we include all above factors?
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8 Law of Demand The law of demand states that there is an inverse (-) relationship between price and quantity demanded.
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9 Demand Schedule The demand schedule is a table that shows the relationship between the price of the good and the quantity demanded.
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10 Demand Schedule Price Quantity $0.00 12 0.50 10 1.00 8 1.50 6 2.00 4 2.50 2 3.00 0
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11 Demand Curve The demand curve is the downward- sloping line relating price to quantity demanded.
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12 Demand Curve $3.00 2.50 2.00 1.50 1.00 0.50 2 1 3 4 5 6 7 8 9 10 12 11 Price of Ice-Cream Cone Quantity of Ice-Cream Cones 0 Price Quantity $0.00 12 0.50 10 1.00 8 1.50 6 2.00 4 2.50 2 3.00 0
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13 Ceteris Paribus Ceteris paribus is a Latin phrase that means all variables (consumer
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This note was uploaded on 11/16/2011 for the course ECON 202 taught by Professor Kim during the Fall '11 term at CSU Fullerton.

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Chapter 4 Powerpoint - The Market Forces of Supply and...

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