ECON251 Lecture Notes - Lecture 3: Demand Curve, Inferior Good, Perfect Competition

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magentaalpaca968

22 Feb 2017

School

University of Delaware

Department

Economics

Course

ECON251

Professor

Schubert, Jens

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Chapter 3: Where prices come from: the interaction of demand and supply

★Modeling a market

○To analyze a market (e.g. market for oranges), we need a model how buyers and sellers behave

○We assume perfectly competitive market, which is a market with

■Many buyers many sellers

■All firms selling identical products

■No barriers to new firms to enter the market

★The Demand side of the market

○How do buyers behave?

■Demand schedule: a table that shows the relationship between the price of a product and the quantity of the product

demanded

■Demand curve: A curve that shows the relationship between the price of a product and the quantity of the product

demanded

★The Law of Demand

○Quantity demanded: (Q^D) The amount of a good or service that a consumer is willing and able to buy at a given price

○Market demand: is the demand by all the consumers of a given good/service

○Law of demand: as P goes up, (Q^D) goes down and vice versa

■

★Shifting the Demand Curve

○A change in another variable (not price) that affects demand, causes the entire demand curve to shift

○A shift to the right (D1 to D2) is an increase in demand

○A shift to the left (D1 to D3) is a decrease in demand

○

★Factors that influence demand

○Income

■As demand increases, demand increases (Normal good)

■As income increases, demand decreases (Inferior good)

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Document Summary

Chapter 3: where prices come from: the interaction of demand and supply. To analyze a market (e. g. market for oranges), we need a model how buyers and sellers behave. We assume perfectly competitive market, which is a market with. No barriers to new firms to enter the market. Demand schedule: a table that shows the relationship between the price of a product and the quantity of the product demanded. Demand curve: a curve that shows the relationship between the price of a product and the quantity of the product demanded. Quantity demanded: (q^d) the amount of a good or service that a consumer is willing and able to buy at a given price. Market demand: is the demand by all the consumers of a given good/service. Law of demand: as p goes up, (q^d) goes down and vice versa. A change in another variable (not price) that affects demand, causes the entire demand curve to shift.

Related Questions

What are the three conditions for a market to be perfectly competitive? For a market to be perfectly competitive, there must be:

A. many buyers and one seller, with the firm producing a product that has no close substitutes, and barriers to new firms entering the market.

B. many buyers and sellers, with firms selling similar but not identical products, with low barriers to new firms entering the market

C. many buyers and a few sellers, with all firms selling identical products, and no barriers to new firms entering the market.

D. many buyers and sellers, with all firms selling identical products, and no barriers to new firms entering the market.

E. many buyers and a small number of firms that compete, selling differentiated products, and barriers to new firms entering the market.

amberhamster945

A perfectly competitive market is a market that meets the conditions of:

(i) many buyers and sellers, all firms selling differentiated products, and no barriers to new firms entering the market.

(ii) few buyers and sellers, all firms selling identical products, and no barriers to new firms entering the market.

(iii) many buyers and sellers, all firms selling identical products, and significant barriers to new firms entering the market.

(iv) many buyers and sellers, all firms selling identical products, and no barriers to new firms entering the market.

ceruleankangaroo217

What conditions make a market perfectly competitive? A market is perfectly competitive if:

(i) it has many buyers and one firm, which produces a product with no close substitutes, with barriers to new firms entering the market.

(ii) it has many buyers and many sellers, all of whom are selling differentiated products, with no barriers to new firms entering the market.

(iii) it has many buyers and a few sellers, all of whom are selling identical products, with no barriers to new firms entering the market.

(iv) it has many buyers and a few sellers, all of whom are selling differentiated products, with barriers to new firms entering the market.

(v) it has many buyers and many sellers, all of whom are selling identical products, with no barriers to new firms entering the market.

ambertiger96

ECON251 Lecture Notes - Lecture 3: Demand Curve, Inferior Good, Perfect Competition

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