A competitive market a market in which there are many buyers and many sellers so that each has a negligible impact on the market price if you try and charge an unreasonable amount you will make no sells in a competitive market 1 What should we produce 2 How should we produce it 3 Who should consume what we produce cid 127 Markets give the answer most of these questions cid 127 Markets contain 2 actors Buyers the demand side of the market Sellers the supply side of the market Market a group of buyers and sellers of a particular good or service ex when buying gas the price of taking the metro DEMAND Determinants of demand price of good price of other goods Income Preferences tastes fads popularity demographic factors expectations price is on Y axis quantity on X axis results in shifts of the demand curve shift to the right increase in demand every price consumers wish to buy more results in movements along the demand curve only caused by price SUPPLY Comes from the behavior of sellers determinants Price of the product Price of other goods Price of inputs goods used in production Technology machinery used in production ex not buying a house now because housing prices are expected to drop Number of buyers market demand Individual demand schedule is a table that shows the relationship between the price of a good and the quantity demanded Individual demand curve is a graph of the relationship between the price of a good and the quantity demanded yet quantity is a function of price opposite graphing rules of math cid 127 Market demand schedule is a table that shows the relationship between the price of a good and the quantity demanded by all buyers the sum of the buyers quantity demanded cid 127 Market demand curve is a graph of the market demand schedule horizontal summation of the individual demand curve Law of demand is a claim that other things being equal the quantity demanded of a good falls when the price of the good rises price and quantity move in opposite directions inverse relationship between the price of a product and its demand demand curves have negative slopes Changes in demand change in the numbers of the demand schedule caused by a change in one of the determinants of demand NOT price Curve shifters shift to the left decrease in demand every price consumers wish to buy less Changes in quantity demanded when the price of the good changes but everything else remains the same Individual supply schedule a table that shows the relationship between the price of a good and the quantity supplied Individual supply curve a graph of the relationship between the prices of a good and the quantity supplied cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 Market supply the sum of the quantities supplied by all sellers at each price cid 127 Market supply schedule is a table that shows the relationship between the price of a good and the quantity supplied by all sellers Law of supply the claim that the quantity supplied of a good rises when the price of the good rises other things equal the sum of the sellers quantity supplied cid 127 Market supply curve The graph of the market demand schedule horizontal summation of the individual supply curve positive relationship positive slopes Changes in supply Changes in quantity supplied cid 127 Quantity supplied is the amount that sellers are willing and able to sell Supply and demand together equilibrium The point has reached the level when quantity supplied equals the quantity demanded there is no surplus there is no shortage supply demand who gets access to what is produced those who are willing and able to pay for the good can purchase it at the equilibrium price equilibrium quantity the quantity supplied and quantity demanded at the equilibrium price surplus when quantity supplied is greater than quantity demanded too much supplied facing a surplus sellers try to increase sales by cutting the price Shortage when quantity demanded is greater than quantity supplied which cause quantity demanded to rise and quantity supplied to fall until the market reaches equilibrium an excess demand facing a shortage sellers raise the price causing quantity demanded to fall and quantity supplied to rise until the market reaches equilibrium cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127 cid 127
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