Micro Notes 9:19

Micro Notes 9:19 - Micro Notes 9/19 Markets Buyers and...

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Micro Notes 9/19 Markets Buyers and Sellers in voluntary trade (act for your self interest) and use prices as Competition - - buyers compete with other buyers to get the goods Sellers compete with other sellers to sell the goods Pay more than other buyers Sellers have to accept less than other sellers 4 conditions for more competitive markets 1. many sellers and buyers - - more alternatives 2. easy entry into markets 3. same goods available from many sellers 4. Buyers have complete information about the good - - type of good, whos selling it, and the price of the good KEY: the more competitive a market is, the less control a seller has over prices. Seller has to follow market prices DEMAND - - buyers side : amount of goods That buyers are willing and able to purchase at each selling price. A. Law of Demand (strong law) If the price of a good goes up, willing to buy less If the price of a good goes down, willing to buy more. WHY (law of demand) 1. if price goes up, buyers switch to alternative goods 2. if price goes up , buyers can’t afford to buy as much. Shift in Demand - - outside forces change buyers desire for a good. A. Substitute goods - - replacement (coca-cola and pepsi) If price of substitute good goes up, demand for other good shifts right If price of a substitute good goes down, demand for the other good shifts left. B. Complement - - goods used together (PB&J) (Jack and Coke) If price of a complement good goes up, demand for other good shifts left. If price of a complement good goes down, demand for other good shifts right.
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B. Income 1. normal goods - - for most goods, as income goes up, demand shifts right, (can afford) ….if income goes down, demand shifts left 2. inferior goods – lower quality - - income goes up, demands shifts left (switch to better) C. Expectations of buyers - - what buyers expect to happen in future affect demand today D. Number of Buyers - - more buyers demand shifts to right E. Preferences - - general factors affect desire News reports Supply – Producers - - amount of goods sellers are willing and able to make and sell at each selling price Law of supply (weak law) if price goes up sellers are willing to make more… If price goes down sellers are willing to make less. Profits incentive - - higher price – higher profit
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This note was uploaded on 01/06/2012 for the course ECN 211 taught by Professor Kingston during the Fall '08 term at ASU.

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Micro Notes 9:19 - Micro Notes 9/19 Markets Buyers and...

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