ECO1102 Lecture 2: Lecture 2

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4 Aug 2016
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Lecture #2: Chapter 4 Jan 19th
THE MARKET FORCES OF SUPPLY AND DEMAND
- Supply and demand are the two words that economists use most often.
- Supply and demand are the forces that make market economies work.
- They determine the quantity of each good produced and the price at which it is
sold.
- If you want to know how any event or policy will affect the economy, you must
think first about how it will affect supply and demand.
MARKETS AND COMPETITION
- The terms supply and demand refer to the behaviour of people as they interact
with one another in competitive markets.
- Before discussing how buyers and sellers behave, let’s first consider more fully
what we mean by a market and competition.
What Is a Market?
-Market: a group of buyers and sellers of a particular good or service
- Socialists only look at the supply. How much to produce.
What Is Competition ?
-Competitive market: a market in which there are many buyers and many sellers
so that each has a negligible impact on the market price
DEMAND
- We begin our study of markets by examining the behaviour of buyers.
The Demand Curve: The Relationship Between Price and Quantity Demanded
-Quantity demanded: the amount of a good that buyers are willing and able to
purchase
-Law of demand: the claim that, other things equal, the quantity demanded of a
good falls when the price of the good rises
The Demand Curve: The Relationship Between Price and Quantity Demanded
-Demand schedule: a table that shows the relationship between the price of a good
and the quantity demanded
-Demand curve: a graph of the relationship between the price of a good and the
quantity demanded
Market Demand versus Individual Demand
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