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Lecture 7

ECON 1BB3 Lecture Notes - Lecture 7: Monopolistic Competition, Oligopoly, Ceteris Paribus


Department
Economics
Course Code
ECON 1BB3
Professor
Bridget O' Shaughnessy
Lecture
7

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What affects your decision to go to the movies? 10/9/2012 10:30:00 PM
Markets
Group of buyers and sellers
4 types
Perfect Competition
o lots of buyers and sellers difficult for individual buyers and
sellers to influence price
o both firms and households are “price takers” – your decision
whether you want to buy it or not, no bargaining power
o good/service is identical ex. Agriculture products, iron oar etc
Monopoly
o Only one seller
o Seller has some control over the price they set buyers
restrict the possible prices, depends on what the buyers are
willing to spend
Oligopoly
o Few firms in the market
o Ex. Duopoly (2 firms)
Monopolistic competition
o Lots of sellers/buyers but goods being sold aren’t identical
Demand
Quantity demanded (Qd): The amount of a good that buyers are willing
and able to purchase
What you can buy given your current circumstances
The variables that influence know how much buyers want to buy are:
Price
Income
o Normal (buy more when income goes up) and inferior goods
(buy less when income goes up, buy more of what you
wanted in the first place)
Price of other goods
o Substitutes and complements
Taste
o Seasonal fluctuations throughout the year
Valentines day, Halloween
Expectations

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o What we expect to happen to the price of goods
o Ex. Price of gas drops tomorrow = buy less gas today
P
Q
0.05
1000
0.1
800
0.15
600
0.20
400
0.25
200
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