Markets and Competition
● Supply and Demand are the market forces that make the economy work
● In other words it's the behavior of buyers and sellers as they interact in competitive markets
● A market is all the buyers and sellers of a particular good or service
● Buyers determine the demand and the sellers determine the supply of that good or service
● Competitive Market is where there are many buyers and sellers
● Price and quantity are determined by the interaction of buyers and sellers
● Goods offered exactly the same make a perfectly competitive market: neither buyers or
sellers decide the price of the good, it is set by dynamics of demand and supply, additionally
there are more buyers and sellers.
● Monopoly is the only seller in the market and they set the price
Demand
● Quantity demanded is the amount of a good that buyers are willing and able to purchase at
a given price point
● Law of Demand: when the price falls, the quantity demanded rises, and when price of a
good rises, the quantity demanded falls.
● Demand is the relationship between the price of a good and the quantity demanded at each
price
● A demand schedule is a table showing the relationship between the price of a good and the
amount that buyers are willing and able to purchase at various prices; a demand curve is a
graphical object showing the relationship between the price of a good and the amount of
the good that buyers are willing and able to purchase at various prices($
vertical axis,
quantity on horizontal)
● Market demand is the sum of all individual demands for a good or service
● Shifts in a demand curve result in change of "other things"; any change that alters the
quantity demanded shifts the demand curve; everything other than the price of the good
shifts the demand curve(Ex: income of buyers, price of related goods, tastes, expectation,
number of buyers)
● Normal good: An increase in income increases demand.
● Inferior good: An increase in income leads to a decrease in demand, if other things are kept
constant
● Substitutes: two goods; and increase in price of one leads to a higher demand for the other
(Ex. Coke or Pepsi) a substitute will cause a shift in the demand curve.
● Complements: two goods; an increase in price of ones leads to a decrease in demand for the
other (Ex. Bagels and crème cheese)
● Changes in taste alter changes in demand
● Decrease in a price for a good will cause a movement along the demand curve.
● The amount of a good that buyers are willing and able to purchase at a given price is
quantity demanded.
● Supply and Demand are the market forces that make the economy work
● In other words it's the behavior of buyers and sellers as they interact in competitive markets
● A market is all the buyers and sellers of a particular good or service
● Buyers determine the demand and the sellers determine the supply of that good or service
● Competitive Market is where there are many buyers and sellers
● Price and quantity are determined by the interaction of buyers and sellers
● Goods offered exactly the same make a perfectly competitive market: neither buyers or
sellers decide the price of the good, it is set by dynamics of demand and supply, additionally
there are more buyers and sellers.
● Monopoly is the only seller in the market and they set the price
Demand
● Quantity demanded is the amount of a good that buyers are willing and able to purchase at
a given price point
● Law of Demand: when the price falls, the quantity demanded rises, and when price of a
good rises, the quantity demanded falls.
● Demand is the relationship between the price of a good and the quantity demanded at each
price
● A demand schedule is a table showing the relationship between the price of a good and the
amount that buyers are willing and able to purchase at various prices; a demand curve is a
graphical object showing the relationship between the price of a good and the amount of
the good that buyers are willing and able to purchase at various prices($
vertical axis,
quantity on horizontal)
● Market demand is the sum of all individual demands for a good or service
● Shifts in a demand curve result in change of "other things"; any change that alters the
quantity demanded shifts the demand curve; everything other than the price of the good
shifts the demand curve(Ex: income of buyers, price of related goods, tastes, expectation,
number of buyers)
● Normal good: An increase in income increases demand.
● Inferior good: An increase in income leads to a decrease in demand, if other things are kept
constant
● Substitutes: two goods; and increase in price of one leads to a higher demand for the other
(Ex. Coke or Pepsi) a substitute will cause a shift in the demand curve.
● Complements: two goods; an increase in price of ones leads to a decrease in demand for the
other (Ex. Bagels and crème cheese)
● Changes in taste alter changes in demand
● Decrease in a price for a good will cause a movement along the demand curve.
● The amount of a good that buyers are willing and able to purchase at a given price is
quantity demanded.
