FMSC 290 Lecture Notes - Lecture 10: Perfect Competition, Ebay
1 May 2018
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Lecture February 27th, 2018
• Review what we have learned
• Example of island to create a model of reality
Lecture March 1st, 2018
• The Market forces of supply and demand
• Supply and demand
o Words economists use most often
o The forces that make market economies work
o Refer to the behavior of people as they interact with one another in competitive
markets
• Market
o A group of buyers and sellers of a particular good or service
o Buyers as a group
▪ Determine the demand for the product
o Sellers as a group
▪ Determine the supply of the product
o They have very different motives
o Does not have to have a physical presence, for example EBay
o Each product has their own industry
o Everything has markets
• Competitive market
o Market in which there are many buyers and many sellers
o Each has a negligible impact on market price
o Price and quantity are determined by all buyers and sellers
▪ As they interact in the marketplace
o They want to charge at the highest price possible and produce it at the lowest
possible price
o Causes the price of production to go down
o Competition is absent in the health care market
• Perfectly competitive market
o Goods offered for sale are all exactly the same
o Buyers and sellers are so numerous
▪ No single buyer or seller has any influence over the market price
▪ Price takers
o At the market price
▪ Buyers can buy all they want
▪ Sellers can sell all they want
• Monopoly
o The only seller in the market
o Sets the price
• Other markets
o Between perfect competition and monopoly
• Demand
o Quantity demanded
▪ Amount of a good that buyers are willing and able to purchase
o Law of demand
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