ECONS 101 – 1st Edition Lecture 6 Outline of Last Lecture I. Graphing in Economics Outline of Current Lecture I. Supply, Demand & Equilibriuma. Assumptionsb. Laws of Supply and DemandCurrent LectureAssumptions:- Perfectly Competitive Markets:o Many buyers and sellers (no market power –price makers)o All goods and services are identical (homogenous).o No barriers to enter or exit the market.o Perfect information.o Not very realistic, but a nice way to introduce the market.- Two variables: Price and Quantity. o What can be controlled.o Determine if changes are a shift or movement along the curves.Demand:- Quantity Demanded:o The amount of the good or service a consumer is willing and able to purchase at a given price.o Demand Curve:  The relationship between the PRICE of a product and the quantity demanded.- Market Demand and Law of Demand:o Law of Demand: Ceteris Paribus:- PRICE of a product FALLS  The Quantity Demanded INCREASESo The demand by all the consumers (yes, every last one…)o Slopes down and to the right.These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.Supply:- Price will determine whether or not a supplier can at least cover the cost of production (marginal cost).o We assume increasing marginal costs: As you produce one more unit of a good or service, the cost increases.- NOT RESTRICTED BY INCOME.- Quantity Supplied:o The amount a firm is willing and able to supply at a given price.o Supply Curve: The relationship between the PRICE of a product and the quantity of the product supplied.- Market Supply and Law of Supply:o Law of Supply: Ceteris Paribus:- PRICE INCREASE  The Quantity Supplied INCREASESo The supply by all producers of a given good or service.o Slopes up and to the right. Increasing marginal costs.Equilibrium:- Market Equilibrium occurs when Quantity Demanded is the same as Quantity Supplied.o Equilibrium = Market