Demand and Supply Markets and Competition A market is a group of buyers and sellers of a particular product A competitive market is one with many buyers and sellers each has a negligible effect on price i e Walmart or Starbuck will not change price for individual buyer A perfectly competitive market All goods exactly the same buyers sellers so numerous that no one can affect market price Demand Quantity Demand Law of Demand Demand Schedule the quantity demanded Demand Curve The amount of the good that buyers are willing and able to purchase The claim that the quantity demanded of a good falls when the price of the good rises when other things are equal A table that shows the relationship between the price of a good and quantity demands are dots many data dots from different buyers prices will form a curve shows how price affects quantity demand Demand Curve price non price determinants Price causes a movement along the D curve of buyers shifts the D curve Income shifts the D curve Price of related goods shifts the D curve Tastes shifts the D curve Expectations shifts the D curve Explanation Examples Increase in of buyers increases quantity demanded at each price shifts D curve to the right Demand for a normal good is positively related to income Increase in income shifts its D curve to the right Demand for an inferior good is negatively related to income Increase in income shifts its D curve to the left Inferior good is a type of good whose demand declines when income rises Conversely demand for them will increase when income falls Can you think of any goods you would use less if you suddenly got a wage raise Maybe you d stop buying cheap frozen dinners It is not based on brand quality Someone s normal good can be inferior good for another Increase in the price of a substitute of the good causes an increase in demand for the good i e Coke and Pepsi Increase in the price of a complement of the good causes a decrease in demand for the good i e computers and software Anything that causes a shift in tastes toward a good will increase demand for that good and shift its D curve to the right Expectations affect consumers buying decisions i e if you expect income goes up demand for eat out may increase Price always on y vertical axis demand always on x horizontal axis Supply Quantity Supply Supply Curve Supply Schedule the quantity supplied Law of Supply The amount that sellers are willing and able to sell quantity supply are dots many data dots from different sellers prices will form a curve shows how price affects quantity supply A table that shows the relationship between the price of a good and The claim that the quantity supplied of a good rises when the price of the good rises when other things are equal Supply Curve price non price determinants Price causes a movement along the S curve Input Prices shifts the S curve Technology shifts the S curve of Sellers shifts the S curve Expectations shifts the S curve Fall in input prices such as wages prices of raw materials makes production more profitable at each output price so firms supply a larger quantity at each price and the S curve shifts to the right A cost saving technological improvement has the same effect as a fall in input prices shifts S curve to the right An increase in the number of sellers increases the quantity supplied at each price shifts S curve to the right Sellers may adjust supply when their expectations of future prices change If good not perishable i e if sellers expect price goes up in close future they may cut supply and wait sell it later Therefore S curve shifts left Price always on y vertical axis supply always on x horizontal axis P S Bring Work sheet to Thursday class