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ECON 201 Lecture Notes - Lecture 2: Market Power, Market Structure, Demand Curve

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School
Northwestern University
Department
Economics
Course
ECON 201
Professor
David Berger

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Document Summary

A market in which a single buyer or seller has a negligible effect on the price. Perfectly competitive market: a market an individual buyer or seller has no effect on the price. Look at market price and choose if and how much to buy/sell: price taker. Market definition: a group of buyers and sellers of a particular good or service. Oligopoly= is a market form wherein a market or industry is dominated by a small number of sellers. What is the maximum you would be willing to pay . If you change price, that will be a movement along the demand curve. If you change an external variable from price and quantity, it will be a shift in the demand curve. Demand curve shifts right for normal goods. Demand curve shifts left for inferior goods. Price of wool sweater for demand of fleece jackets. Price of gas for demand of cars. Kanye makes video extolling virtues of strawberry ice cream.

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Related Questions

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

A competitive market is a market in which:

1.Ā there are only a few sellers.

2.Ā the forces of supply and demand do not apply.

3.Ā an auctioneer helps set prices and arrange sales.

4.Ā no individual buyer or seller has any significant impact on the market price.

For a market to be competitive:
Ā 
A) each buyer and seller is small, relative to the world market; no single decision-maker has any influence over the market price.
B) sellers must produce goods and services that are different from their competitors.
C) sellers should have substantial pricing power.
D) all you need are many buyers and many sellers
E) the price must be a fair price