AS.180.101 Chapter Notes - Chapter 3: Ceteris Paribus, Demand Curve, Complementary Good

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pearmule696

30 Aug 2016

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Chapter 3: where prices come from: the interaction of demand and supply. Model of s/d most powerful tool in economics to explain how prices are determined. Model of demand and supply assumes that we are analyzing a perfectly competitive market. Usefulness of a model depends on how well it can predict outcomes in a market. This model= successful in predicting changes in quantities & prices in markets. Main factor in consumer decisions price of the product. Considering not what a consumer wants but what he is willing and able to buy. Buyers demand a larger quantity of a product as the price falls because the product becomes less expensive relative to other products and because they can afford to buy more at a lower price. When prices fall, the increased purchasing power of consumers" incomes will usually lead them to purchase a larger quantity of the good. Variables that shift market demand: 1.

Related Questions

Choose a market for a good in your area that seems to be a perfectly competitive market. Perfect competition is useful in analyzing real-world markets, even though there are very few, if any, that match the characteristics of the perfect competition model. Answer the following questions to describe the market, and describe how competitive the market you have chosen is:

What good or service is provided in this market?

Who are the buyers and who are the sellers in the market?

Are there many sellers in the market?

Are there very many substitutes for the good or service?

If the store where you usually buy this item raised its prices, would you go to another store or switch products? Explain.

Do you think that this a competitive market? Explain.

erinlouse173

Office building maintenance plans call for the stripping, waxing, and buffing of ceramic floor tiles. This work is contracted out to maintenance firms, and both technology and labor requirements are very basic.

Supply and demand conditions in this perfectly competitive service market in New York are:

Q_S = 2P - 20

(Supply)

Q_D = 80 - 2P

(Demand)

- where Q is thousands of hours of floor reconditioning per month and P is the price per hour.

A.	Algebraically determine the market equilibrium price/output combination.

B.	Use a graph to confirm your answer.

For the graph, use prices: 10, 20,30,40,50,60,70,80,90

and Quantities:5,10,15,20,25,30,35,40,45,50,55,60,65

rubydog364

1. Characteristics of competitive markets

The model of competitive markets relies on these three core assumptions:

1.	There must be many buyers and sellers a few players can't dominate the market.
2.	Firms must produce identical products buyers must regard all sellers' products as equivalent.
3.	Firms and resources must be fully mobile, allowing free entry into and exit from the industry.

The first two conditions imply that all consumers and firms are price takers. While the third is not necessary for price-taking behavior, assume for this problem that a market cannot maintain competition in the long run without free entry.

Identify whether or not each of the following scenarios describes a competitive market, along with the correct explanation of why or why not.

Scenario	Competitive?
The government has granted the U.S. Postal Service the exclusive right to deliver mail.	________________
Several stores in the mall sell hooded sweatshirts. Each store's sweatshirts reflect the style of that particular store. Additionally, some makers use higher-quality cotton than others, which is reflected in the apparel's prices.
Two taxi companies serve most of the market in a big city. Consumers don't care about which taxi company they take if they decide it's worth taking a taxi, they flag down the nearest one.	_________________
There are dozens of pasta producers that sell pasta to hundreds of Italian restaurants nationwide. The restaurant owners buy from the cheapest pasta producer available to

copperhamster111

AS.180.101 Chapter Notes - Chapter 3: Ceteris Paribus, Demand Curve, Complementary Good

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