ECON 205 1st Edition Lecture 1 Outline of Current Lecture II The Market is made of buyers and sellers III Supply Demand cause changes in price and quantity Current Lecture Markets Competition Markets are usually competitive o We assume all markets are perfectly competitive o All participants are price takers o No one person affects the overall market Demand Price determines demand Law of Demand all else equal quantity demand decreases when price increases Measure demand with a demand schedule o Demand schedule is the price vs demand curve Market Demand vs Individual Demand Market demand is the sum of quantities demanded by all buyers at each price Demand Shifters Curve shows how price affects quantity demanded Non price determiners of demand will shift curve Factors of non price determiners are o Income Demand of normal good is positively related to income Demand for inferior good is negatively related to income o Price of related goods Increase in the price of one substitute good goods that are the same as the original good in function and quality will increase the demand for the original good Increase in the price of a complement good goods that enhance the function or quality of the original good will decrease the demand for the original good o Tastes Purely set by the ebb and flow of trends o Expectations What we think will happen next year affects decisions today i e if you predict a product to become more expensive later buy more now o Size of the market The number of buyers will shift the demand curve Supply Quantity of goods produced Law of supply all else equal supply increases as price increases
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