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Lecture 6

ECON 101 Lecture Notes - Lecture 6: Noodle, Inferior Good, OligarchyPremium

4 pages23 viewsWinter 2015

Department
Economics
Course Code
ECON 101
Professor
Marina Adshade
Lecture
6

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ECON 101 - Lecture #6 - Markets and Demand
Markets
A group of buyers and sellers of a good or service
Involves interaction of buyers and sellers
Typically establishes a price for the good or service
Buyers determine demand
Sellers determine supply
Types of Markets
A competition market
Independent buyers and independent sellers
No monopoly (no single buyer or seller is powerful to influence the price
The goods being offered are identical
Firms are free to enter and leave the market
If the four qualities listed above are satisfied, the market is perfectly competitive
Uncompetitive markets
○ Monopoly
○ Oligarchy
The competitive market might not be the fitting model for every market; but that is what
we are going to use for the sake of simplicity
Question 1
Why did bacon and lime become very expensive last year?
● Answer
Disease on piglets caused supply to decrease
Mexico’s heavy rainfall caused the the underproduction of limes
This question gives a little insight into the relationship between supply and price
Demand and Supply Model
The basic supply and demand model shows how buyers and sellers interact to
determine price and quantity sold
This model works best for competitive market
For competitive markets (refer to the four requirements above), price adjusts
quickly and reflect the buyers’ and sellers’ wishes
Demand
Quantity demand is the amount of good consumers would like to purchase during a
specific period of time
Quantity demanded might be different from quantity actually bought or quantity
exchanged
Factors that influence demand
Good’s price
Price of related goods
Consumers’ income
Consumers’ preferences and tastes
Expectations about the future
The number of consumers in the market
As price increases, demand decreases (As per Figure 1)
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