L-4 Principles of Economics (supply and Demand).pptVIP

Supply and demand are the two words that economists use most often. Supply and demand are the forces that make market economies work. Modern microeconomics is about supply, demand, and market equilibrium. MARKETS AND COMPETITION Buyers determine demand. Sellers determine supply Can you give me some examples of the following? Perfect Competition Products are the same Numerous buyers and sellers so that each has no influence over price Buyers and Sellers are price takers Monopoly One seller, and seller controls price Competition: Perfect and Otherwise Oligopoly Few sellers Not always aggressive competition Monopolistic Competition Many sellers Slightly differentiated products Each seller may set price for its own product DEMAND Quantity demanded is the amount of a good that buyers are willing and able to purchase. Law of Demand The law of demand states that, other things equal, the quantity demanded of a good falls when the price of the good rises. The Demand Curve: The Relationship between Price and Quantity Demanded Demand Schedule The demand schedule is a table that shows the relationship between the price of the good and the quantity demanded. Catherine’s Demand Schedule The Demand Curve: The Relationship between Price and Quantity Demanded Demand Curve The demand curve is a graph of the relationship between the price of a good and the quantity demanded. Figure 1 Catherine’s Demand Schedule and Demand Curve Market Demand versus Individual Demand Market demand refers to the sum of all individual demands for a particular good or service. Graphically, individual demand curves are summed horizontally to obtain the market demand curve. Shifts in the Demand Curve Change in Quantity Demanded Movement along the demand curve. Caused by a change in the price of the product. Changes in Quantity Demanded Shifts in the Demand Curve Consumer income Prices of related goods Tastes Expectations Number of buyers Shifts in the Demand Curve Change in Demand A shift in th