Micro Ch 4 1 Market a group of buyers and sellers of a good service 2 Competitive Market one with many buyers and sellers each has little to no effect of the price a One seller can t change the price without risking loss of business 3 Perfectly Competitive a All goods are the same homogeneous b All buyers and sellers are the price takers c No power to change price 4 Law of demand quantity demanded falls when the price of the good rises Demand schedule a table that shows the relationship between price and 5 quantity demand 6 Market demand curve the sum of all individual demand curves 7 Shifters of the demand curve Increase shift to the right a b Decrease shift to left c Change in the number of buyers d Income changes depends on the good i Normal goods 1 A good you demand more of if income rises 2 Shoes purse new car house used cars ii b Inferior Good 1 Ramen noodles frozen pizza bus rides off brand 2 Anything you would stop buying when you earn more things keystone money 3 When income increases quantity demand decreases 8 Price of related goods a Hot dog price increases your quantity demand decreases b Compliments increase in the price of one good decrease in the quantity of the other c Price of pizza increases demand for Hot Dogs increases d Substitutes increase in the price of one good increase in the quantity of the other 9 Tastes shift your entire demand no matter the price 10 Change the price of good we are talking about it is a movement not a shift 11 Expectations 12 Supply a Law of supply claim that quantity supplied increases when the price b Supply Schedule for an individual supplier their supply curve of a good increases Marginal Cost MC curve c Supply shifters i Input prices 1 Ex company sells windows takes 2 months to install windows to get paid could run out of money in the meantime Input prices could be wages 2 ii Technology increase in supply iii Number of sellers ex restaurants opening downtown increase supply of food lower the price iv Expectations even though things change in the future maintenance on oil refineries priced will increase today
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