applications of demand and supply - Product Markets markets...

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Product Markets – markets in which firms supply goods & services demanded by households Factor Markets – Markets in which households supply factors of production (labor, capital, natural resources) demanded by firms A change in equilibrium in one market (haircuts) will affect equilibrium in related markets (barbers) Chapter 4: Applications of Demand & Supply Markets in which prices adjust quickly to changes in demand or supply: 1. Personal Computer Market – supply drastically increased. 1 st IBM was dominant maker of large mainframe computers 1 st desktop computers by Apple IBM introduced PCs computer usage increased quickly. Now it’s a very competitive market (many suppliers) Rapid increase in # of firms & tech improvements increase in supply. Incomes rose & new uses for computers were found (altered preferences of consumer & business users) increased demand Rightward shift in supply has outweighed rightward shift in demand (fall in equil price & increase in equil quantity) 2. Markets for Crude Oil & for Gasoline – 1973-1974 crude oil price per barrel quadrupled, then
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