ECON 162 9 25 15 Demand Supply Analysis Demand Curve A model that describes the behavior of consumers in a market Supply Curve A model that describes the behavior of producers in a market Market A collection of buyers and sellers where exchange takes place 3 Characteristics 1 Time Period 2 Geographic Space 3 Product Space Types of Resource Allocation Mechanisms 1 Government Edict a Merit Based Criteria b Arbitrary Criteria c Egalitarianism Lottery Random 2 3 First Come First Served Queuing 4 Markets Lessons 1 Law of Demand There is an inverse relationship between the price of a good and the quantity demanded of that good ceteris paribus 2 Equilibrium Occurs at the intersection of the supply and demand curves 3 Markets Allocate resources to their most valuable uses 4 Markets are efficient regardless of the distribution or income Equity vs Efficiency Law of Supply There is a positive relationship between the price of a good and the quantity supplied of that good ceteris paribus
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