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Lecture 4

Econ 105 Lecture 4 Jan 17th.doc

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Simon Fraser University
ECON 105
Brian Krauth

Econ 105 Lecture 4 notes Jan 17th Types of economies: -command = one person (or firm) decides who gets what. (Al tells betty to make X number of peanut butter and Y number of bread and he takes it all) -bargaining = two or more parties meet to try and achieve a division of the surplus of the goods, if they can't agree on anything, they have the option of going back to autarky. -market = a firm or person sets a price that cannot be changed. ****** see notebook for graph + problem***** ( 1 ) Things to notice: 1) Prices determine opportunity costs. 2) Only relative prices matter. 3) Prices can encourage producers to produce according to their comparative advantage. ^ Not on the exam. Chapter 4: The Market Forces of Supply and Demand -Markets = A market is a group of buyers and sellers for a particular good or service. -Competitive market = A competitive market is one in which there are so many buyers and sellers that any one individual has negligible influence. -Perfectly competitive market = one market in which: 1) The goods offered for sale are all exactly the same 2) Everyone is a price taker. That is they assume they can buy or sell as much as they want without affecting the price. -Competitive = accurate description of some real markets -Perfectly Competitive = model of a competitive market -A Monopoly = a market in which there is only one seller, called the monopolist. -A Monopsony = a market with only one buyer ( the monopsonist) -Actual markets lie somewhere in between the two theoretical extremes. -Perfect competition = minimal market power ; Monopoly = maximum market power. Competitive markets Model considering the behavior of price taking buyers ( demand ) then the behavior of price taking sellers ( supply ). Demand: -Quantity demanded is the amount of a particular good that consumers are willing and able to purchase. - things that affect
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