Learning Module 4 - Learning Module #4: The Market Forces...

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Learning Module #4: The Market Forces of Supply and Demand Introduction Where Prices Come From: The Interaction of Demand and Supply The latest video game Doom X is scheduled to be released, just in time for the holiday shopping season. Thousands of consumers have been waiting for this release. Their demand schedule will detail the number of games they are willing and able to buy at various prices. The video game will be available in many different retail outlets and the supply schedule will give the amount they are willing to sell at different prices. How will the "laws of the marketplace", that is "the laws of supply and demand" help to determine a market price of this game? 1. What is the relationship between the price of the game and the amount that the consumers are willing to purchase? 2. What is the relationship between the price of the game and the amount that the producers are willing to supply? 3. What determines the price of the game? Will the quantity the consumers are willing to purchase always equal the amount sellers offer for sale at that price? If not, what would be the effect? The video game Doom X! What determines its price?
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Learning Module #4 – The Market Forces of Supply and Demand Learning Module Objectives By the end of this module, students should understand: 1. what a competitive market is. 2. what determines the demand for a good in a competitive market. 3. what determines the supply of a good in a competitive market. 4. how supply and demand together set the price of a good and the quantity sold. 5. the key role of prices in allocating scarce resources in market economies. Module 4.1 - Markets and Competition What is a Market? A market is a group of buyers and sellers of a particular good or service. What is Competition? Supply and Demand: A Model of a Competitive Market Competitive market – a market in which there is a large number of buyers and sellers and in which no buyer or seller has the power to influence the price. Each buyer knows that there are several sellers from which to choose. Sellers know that each buyer purchases only a small amount of the total amount sold. The supply and demand model is designed to explain how prices are determined in competitive markets
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Module 4.2 - Demand The Demand Curve: The Relationship between Price and Quantity Demanded The demand schedule and demand curve Demand Schedule – A table showing the quantities of a good a consumer is willing and able to buy at alternative prices in a given time period, ceteris paribus . Demand Curve – A curve describing the quantities of a good a consumer is willing and able to buy at alternative prices in a given time period, ceteris paribus . Quantity Demanded
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Learning Module 4 - Learning Module #4: The Market Forces...

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