v
r s
2 Model Competition o d
of perfect
THE MARKET
market institutions in whichbuyers seller exchange a good
P
seller rules of trade supply
buyer
determines
supply determines demand XQ Conyer
markets face competition model of Perfectcompetition P mc
characteristics Assumptions
I Goods offered for sale are the same homogeneous goods
2 Buyers sellers are pricetakers so numerous that no single one has influence
manyof them overtheprice of the good'strading
If agentisn't a price taker he has market power
Model applies to some markets9 Ex wheat
other markets
L competitive market a market with
manybuyers sellers interested inthe sam
good so that eachhas a negligible impact on the market price
i monopoly a single seller can change prices to his
liking
i oligopoly few sellers playingwith price can bepossible
i monopolistic competition manysellers with slightly products ex bakeries
THE DEMAND
quantity demanded amountof a good buyers are willing able to purchase related
to the price of the good
Relationshipbetweenprice quantity Lawofdemand claimthatotherthingsequal quantity
demanded of a good
favswhentheprice
Demand schedule table showingpricevsquantitydemanded ofthegoodrises
Demand curvefunction showing quantitydemanded
as a function oftheprice
DEMAND satisfies law of demand
CURVE Ivprices T quantities
Decreased
in price constructed under ceteris paribas condition
all other factors are constant
shifs in demand have no priceeffect
quantity curvetorightoincreaseindemand
s curvetoleft deceaseindemard
increase in quantity
demand
r s
2 Model Competition o d
of perfect
THE MARKET
market institutions in whichbuyers seller exchange a good
P
seller rules of trade supply
buyer
determines
supply determines demand XQ Conyer
markets face competition model of Perfectcompetition P mc
characteristics Assumptions
I Goods offered for sale are the same homogeneous goods
2 Buyers sellers are pricetakers so numerous that no single one has influence
manyof them overtheprice of the good'strading
If agentisn't a price taker he has market power
Model applies to some markets9 Ex wheat
other markets
L competitive market a market with
manybuyers sellers interested inthe sam
good so that eachhas a negligible impact on the market price
i monopoly a single seller can change prices to his
liking
i oligopoly few sellers playingwith price can bepossible
i monopolistic competition manysellers with slightly products ex bakeries
THE DEMAND
quantity demanded amountof a good buyers are willing able to purchase related
to the price of the good
Relationshipbetweenprice quantity Lawofdemand claimthatotherthingsequal quantity
demanded of a good
favswhentheprice
Demand schedule table showingpricevsquantitydemanded ofthegoodrises
Demand curvefunction showing quantitydemanded
as a function oftheprice
DEMAND satisfies law of demand
CURVE Ivprices T quantities
Decreased
in price constructed under ceteris paribas condition
all other factors are constant
shifs in demand have no priceeffect
quantity curvetorightoincreaseindemand
s curvetoleft deceaseindemard
increase in quantity
demand
