Microeconomics 21/9/22

 Markets and Competition

Supply and Demand

- Words economists use most often

- The forces that make market economies work

Market

- A group of buyers and sellers of a particular good or service

Buyers as a group = determine the demand

Sellers as a group = determine the supply

Markets take many forms

- Highly organized

- Less organized

Competitive Market

- Many buyers and sellers

- Each has negligible impact on market price

- Price and quantity are determined by all buyers and sellers

Monopoly

- The only seller in the market = seller sets the price

Other markets

- Between perfect competition and monopoly

Demand

Quantity demanded = amount of goods buyers are willing and able to purchase

Law of demand

- When the price of a good increases, the quantity demanded falls

Individual demand = demand of individual for product

Market demand = sum of all individual demand

Shifts in the demand curve

- Increase in demand = demand curve shifts to the right

- Decrease in demand = demand curve shifts to the left

Variables that can shift the demand curve

- Income

- Price of related goods

- Tastes

- Expectations

- Number of buyers

Supply

Quantity supplied = amount of goods sellers are willing and able to sell

Law of supply

- When the price rises, the quantity supplied rises

Individual supply = seller's individual supply

Market supply = sum of all the supplies of all sellers

Shifts in the supply curve

- Increase in supply = supply curve shifts to the right

- Decrease in supply = supply curve shifts to the left

Variables that can shift the supply curve

- Input prices

- Technology

- Expectations about future

- Number of sellers