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Chapter 4 Notes SupplyDemandillustration of how prices determined and how prices allocate economys scarce resourcesCold snap hits Florida OJ price rises in Canadawhen warm in Quebec in summer Caribbean hotel rooms dropMiddle East conflict price of gas in Canada rises and thus prices of SUVs fallMarketgrp of buyers and sellers of a specific goodservicebuyers of the group determine demand sellers of the group determine supply Competitionmost markets highly competitivebuyer knows there are several seller optionscompetitive marketmarket wh has many buyerssellers such that each has a negligible impact on the market pricePerfectly competitiveto reach highest form of competition market must have i good offered for sale are all the same priceii buyers and sellers are so numerous that no influence over market price takersbc they accept the price the market determines Wheat marketthousands of farmers who sell wheat and millions of consumers who use wheatwheat productsperfectly competitiveeach takes price givenSome markets only have 1 seller and seller sets pricecalled a monopolycable tv company for example Assuming perfect competition is a useful simplification Quantity Demandedthe amount of a good that buyers are able and willing to purchase price of good plays central roleprice rises and fallsquantity demanded changesquantity demanded is negatively related to the price true for most goodseconomists call this the law of demand other things equal the quantity demanded of a good falls when the price of the good risesdemand scheduletable illustrating rltishp btwn price of good and quantity demandeddemand curvegraph of rltishp btwn price of a good and quantity demanded Market demand vs individual demandindividualcatherinemarket demandcatherinenicholas adding of quantities on horizontal axisDemand curve will shift if something happens that will affect the quantity demanded if nutritionist found out that ice cream has health benefits discovery would raise demand for ice cream any given price buyers would want to purchase larger quantities shift demand curve to rightif change lower quantity demand curve shifts to leftnormal goodgood for wh other things equal an increase in income leads to an increase in demandor decrease in income leads to decrease in demandincome and quantity vely related
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