Chapter 4 Market Forces of Supply and Demand Introduction market group of buyers and sellers of a particular good or service competitive market many buyers sellers selling identical products each buyer seller is a price taker perfectly competitive market goods are exactly the same many buyers sellers price takers buyers sellers in perfectly competitive markets accept the price determined by the market The Demand Curve quantity demanded amount of the good that buyers are willing and able to purchase law of demand when the P of a good rises the Q demanded of the good falls and when the P falls the Q demanded rises demand schedule table shows relationship between price of a good and Q demanded demand curve graph of relationship between price of a good and Q demanded Shifts in the Demand Curve normal good an increase in income leads to increase in demand luxuries inferior good a decrease in income leads to increase in demand mass transportation substitutes an increase in price of good 1 leads to increase in demand of good 2 butter margarine compliments an increase in price of good 1 leads to decrease in demand of good 2 hamburgers buns Supply quantity supplied amount that sellers are willing and able to sell law of supply when the P of a good rises the Q supplied of the good rises when the P falls the Q supplied falls supply schedule shows the relationship between the price of a good and the quantity supplied supply curve graph of relationship between P of good and Q supplied Supply and Demand Together equilibrium point where supply and demand cures intersect point shows equilibrium P and Q surplus supply is greater than demand shortage demand is greater than supply
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