ECON 2005 Lecture Notes - Lecture 5: Sole Proprietorship, International Trade, Ceteris Paribus
Document Summary
Model of supply and demand: there are three elements to our simple model, households, firms, the markets where consumers and producers interact. Market players: households, consume outputs, supply inputs, firms, organizations that transforms resources (inputs) into products (outputs). Markets: there are two types of markets, product or output markets, the markets in which goods and services are exchanged (households demand, firms supply) Input or factor markets: the markets in which the resources used to produce products are exchanged (households supply, firms demand) Land market the input/factor market in which households supply land or other real property in exchange for rent. Input markets and output markets: the circular flow. Output markets demand and the demand curve. Important to this is that buyers cannot choose what price to pay. Law of demand: price and quantity are inversely related. As price goes up, quantity that people want to buy falls (all else equal).