Chap_04 The Market Forces of Supply and Demand.ppt

The Market Forces of Supply and Demand
Chapter 4
The Market Forces of Supply and Demand
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
A market is a group of buyers and sellers of a particular good or service.
The terms supply and demand refer to the behavior of people . . . as they interact with one another in markets.
Markets
Buyers determine demand.
Sellers determine supply.
Market Type: petitive Market
petitive market is a market. . .
with many buyers and sellers.
that is not controlled by any one person.
in which a narrow range of prices are established that buyers and sellers act upon.
Competition: Perfect and Otherwise
Products are the same
Numerous buyers and sellers so that each has no influence over price
Buyers and Sellers are price takers
petition
Competition: Perfect and Otherwise
Monopoly
One seller, and seller controls price
Oligopoly
Few sellers
Not always petition
Competition: Perfect and Otherwise
petition
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 there is an inverse relationship between price and quantity demanded.