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ECON 2310 Lecture Notes - Lecture 14: Demand Curve, Deadweight Loss, Perfect Competition

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School
University of Guelph
Department
Economics
Course
ECON 2310
Professor
Johanna Goertz

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Document Summary

Price taker: buyer/seller is price taker if they take the market price as given (unaffected by their actions) in deciding how much to sell or buy. In a perfectly competitive market, there is absence of transaction costs (when sellers can easily communicate their prices). The products are homogeneous meaning they are identical in the eyes of purchases (wheat is wheat). [products are differentiated when some buyers view the products as different. Third factor is the presence of a large number of buyers and sellers, each accounting for a small fraction of the overall demand or supply of the good. At any given price, the market demand for a product is the sum of the demands of all the individual consumers. The market demand curve is the horizontal sum of the individual demand curves. So(cid:373)eti(cid:373)es, a (cid:272)o(cid:374)su(cid:373)er"s de(cid:373)a(cid:374)d (cid:272)ur(cid:448)e differs i(cid:374) the short a(cid:374)d lo(cid:374)g ru(cid:374) a(cid:374)d so (cid:449)ill the (cid:373)arket demand curve.

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Related Questions

suppose that some market consists of 100 buyers and 10 sellers.Each buyer has an identical individual demand curve,
P=300-3Q
Each seller has an identical individual supply curve,
P=Q
The market demand curve will thus take the form P=a-bQ and themarket supply curve will take the form P=cQ+d. In the followingquestions, I want you to solve for a, b, c, and d.

3. What is the value of the Ć¢Ā€ĀœaĆ¢Ā€Ā term in the market demandcurve?
4. What is the value of the Ć¢Ā€ĀœbĆ¢Ā€Ā term in the market demand curve?(Use decimals. Round to two decimal places)
5. What is the value of the Ć¢Ā€ĀœcĆ¢Ā€Ā term in the market supply curve?(Use decimals. Round to two decimal places)
6. What is the value of the Ć¢Ā€ĀœdĆ¢Ā€Ā term in the market supplycurve?

suppose that some market consists of 50 buyers and 100 sellers.Each buyer has an identical individual demand curve,
P=200-4Q
50 sellers have an identical individual supply curve,
P=Q+40
The remaining 50 sellers have identical supply curves equalto
P=Q+20
The market demand curve will thus take the form P=a-bQ and themarket supply curve will take the form P=cQ+d (I want you to focuson the part of the supply curve where prices are such that allsellers are willing to sell the good). In the following questions,I want you to solve for a, b, c, and d.

7. What is the value of the Ć¢Ā€ĀœaĆ¢Ā€Ā term in the market demandcurve?
8. What is the value of the Ć¢Ā€ĀœbĆ¢Ā€Ā term in the market demand curve?(Use decimals. Round to two decimal places)
9. What is the value of the Ć¢Ā€ĀœcĆ¢Ā€Ā term in the market supply curve?(Use decimals. Round to two decimal places)
10. What is the value of the Ć¢Ā€ĀœdĆ¢Ā€Ā term in the market supply curve?

The market demand curve

a. slopes upward.

b. is found by vertically adding the individual demand curves.

c. represents the sum of the quantities demanded by all the buyers at each price of the good.

d. represents the sum of the prices that all the buyers are willing to pay for a given quantity of the good.

When we move along a given demand curve,

a.

all nonprice determinants of demand are held constant.
b.

only price is held constant.
c.

all determinants of quantity demanded are held constant.

d. income and price are held constant.

When the price of a good or service changes,

a.

there is a movement along a given demand curve.
b.

the demand curve shifts in the opposite direction.
c.

the supply curve shifts in the opposite direction.
d.

the demand curve shifts in the same direction.

1. Which of the following is a difference between a perfectly competitive market and a monopoly?

A. There are huge barriers to entry in a perfectly competitive market, while there are no barriers to entry in a monopoly.

B. The market demand curve faced by a perfectly competitive firm is horizontal, while the market demand curve in a monopoly is downward-sloping.

C. The sellers in a perfectly competitive market are price-makers, while a seller in a monopoly market is a price-taker.

D. The equilibrium price in a perfectly competitive market exceeds marginal revenue, while the equilibrium price in a monopoly equals marginal revenue.

Ā 

2. Which of the following firms is likely to have the highest market power?

A. An oligopoly with homogeneous products

B. A monopoly

C. A monopolistic competitor

D. A perfectly competitive firm