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    CHAPTER 4 The Market Forces of Supply and Demand

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    clara
    The document discusses the market forces of supply and demand. It defines key concepts such as demand curves, supply curves, and what causes them to shift. Specifically, it explains that [1] a demand curve shows the relationship between price and quantity demanded, with non-price factors that can shift the curve, and [2] a supply curve shows the relationship between price and quantity supplied, with non-price factors like input prices and technology that can shift the curve. [3] It distinguishes between shifts of the curves, due to changes in non-price factors, versus movements along the fixed curves due to changes in price.

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    CHAPTER 4 The Market Forces of Supply and Demand

    Uploaded by

    clara
    169 views4 pages
    The document discusses the market forces of supply and demand. It defines key concepts such as demand curves, supply curves, and what causes them to shift. Specifically, it explains that [1] a demand curve shows the relationship between price and quantity demanded, with non-price factors that can shift the curve, and [2] a supply curve shows the relationship between price and quantity supplied, with non-price factors like input prices and technology that can shift the curve. [3] It distinguishes between shifts of the curves, due to changes in non-price factors, versus movements along the fixed curves due to changes in price.

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    Market Forces of Supply and Demand

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    CHAPTER 4 the Market Forces of Supply and Demand

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    The document discusses the market forces of supply and demand. It defines key concepts such as demand curves, supply curves, and what causes them to shift. Specifically, it explains that [1] a demand curve shows the relationship between price and quantity demanded, with non-price factors that can shift the curve, and [2] a supply curve shows the relationship between price and quantity supplied, with non-price factors like input prices and technology that can shift the curve. [3] It distinguishes between shifts of the curves, due to changes in non-price factors, versus movements along the fixed curves due to changes in price.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    169 views4 pages

    CHAPTER 4 The Market Forces of Supply and Demand

    Uploaded by

    clara
    The document discusses the market forces of supply and demand. It defines key concepts such as demand curves, supply curves, and what causes them to shift. Specifically, it explains that [1] a demand curve shows the relationship between price and quantity demanded, with non-price factors that can shift the curve, and [2] a supply curve shows the relationship between price and quantity supplied, with non-price factors like input prices and technology that can shift the curve. [3] It distinguishes between shifts of the curves, due to changes in non-price factors, versus movements along the fixed curves due to changes in price.

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    CLARA MAULINA

    1902155343

    CHAPTER 4: The Market Forces of Supply and Demand

    4-1 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.
    - In a perfectly competitive market:
     All goods exactly the same
     Buyers and sellers so numerous that no one cam affect market price – each is a
    “price taker”

    4-2 Demand

    - The quantity demanded of any good is the amount of the good that buyers are willing and
    able to purchase.
    - Law of demand: the claim that the quantity demanded of a good falls when the price of the
    good rises, other things equal.
    - Demand schedule is a table that shows the relationship between the price of a good and the
    quantity demanded.

    Market Demand vs Individual Demand

    - The quantity demanded in the market is the sum of the quantities demanded by all buyers
    at each price.

    Demand Curve Shifters

    - The demand curve shows how price affects quantity demanded, other things being equal.
    - These ‘other things’ are non-price determinants of demand (i.e., things that determine
    buyers’ demand for a good, other than the good’s price)

    Demand Curve Shifters: # of Buyers

    - Increase in #of buyers increases quantity demanded at each price shift D curve to the right.

    Demand Curve Shifters: Income

    - Demand for a normal good is positively related to income.


     increase in income causes
    increase in quantity demanded at each price, shifts D curve to the right.
    (Demand for an inferior good is negatively related to income. An increase in income
    shifts D curves for inferior goods to the left.)

    Demand Curve Shifters: Prices of Related Goods

    - Two goods are subtitutes if an increase in the price of one causes an increase in demand for
    the other.
    - example: pizza and hamburgers.
    an increase in the price of pizza increases demand for hamburgers,
    shifting hamburger demand curve to the right.
    other example: coke and pepsi.
    laptops and desktop computers.
    CD’s and music downloads.

    Demand Curve Shifters: Price of Related Goods

    - Two goods are complements if an increase in the price of one causes a fall in demand for
    the other.
    - example: computers and software.
    if price of computers rises, people buy fewer computers, and therefore less
    software.
    Software demand curve shifts left.

    other example: college tuition and textbooks.

    bagels and cream cheese.

    Demand Curve Shifters: Tastes

    - Anything that causes a shift in tastes toward a good will increase demand for that good and
    shift its D curve to the right.
    - example:
     The Atkins diet became popular in the ‘90s caused an increase in demand for eggs,
    shifted the egg demand curve to the right.

    Demand Curve Shifters: Expectations

    - Expectations affect consumers buying decisions.


    - example:
     If people expect their incomes to rise, their demand for meals at expensive
    restaurants may increase now.
     If the economy sours and people worry about their future job security, demand for
    new auto may fall now.
    4-3 Supply

    - The quantity supplied of any good is the amount that sellers are willing and able to sell.
    - Law of Supply: the claim that the quantity supplied of a good rises when the price of the
    good rises, other things equal.

    The Supply Schedule

    - Supply Schedule is a table that shows the relationship between the price of a good and the
    quantity supplied.

    Market Supply vs Individual Supply

    - The quantity supplied in the market is the sum of the quantities supplied by all sellers at
    each price.

    Supply Curve Shifters

    - The Supply Curve shows how price affects quantity supplied, other things being equal.
    - These “other things” are non-price determinals of supply.

    Supply Curve Shifters: Input Prices

    - example:
     wages
     prices of raw materials.
    - A fall in input prices 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.

    Supply Curve Shifters: Technology

    - Technology determines how much inputs are required to produce a unit of output.
    - A cost-saving technological improvement has the same effects as a fall in input prices,
    shifts S curve to the right.

    Supply Curve Shifters: # of Sellers

    - An increase in the number of sellers increases the quantity supplied at each price,
    shifts S curve to the right.

    Supply Curve Shifters: Expectations

    - example:
     Events in the Middle East lead to expectations of higher oil prices.
     In response, owners of Texas Oilfields reduce supply now. save some inventory to
    sell later at the higher price.
     S curve shifts left.
    - In general, sellers may adjust supply when their expectations of future prices change.

    Variables that Influence Sellers

    Terms for Shifts vs. Movement Along Curve


     Change in Supply: a shift in the S curve occurs when a non –price determinant of supply
    changes (like technology or costs).
     Change in the quantity supplied: a movement along a fixed S curve occurs when P
    changes.
     Change in demand: a shift in the D curve occurs when a non-price determinant of demand
    changes (like income or #buyers).
     Change in the quantity demanded: a movement along a fixed D curve occurs when P
    changes.

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