ECON 1B03 Chapter Notes - Chapter 4: Perfect Competition, Normal Good, Inferior Good

• School: McMaster University
• Department: Economics
• Course: ECON 1B03
• Professor: Bridget O' Shaughnessy

Document Summary

Chapter 4: the market forces of supply and demand. The terms supply and demand refer to the behavior of people as they interact with one another in competitive markets. A market is a group of buyers and sellers of a particular good or service. The buyers as a group determine the demand for the product, and the sellers as a group determine the supply of the product. Economists use the term competitive market to describe a market in which there are so many buyers and so many sellers that each has a negligible impact on the market price. A seller has little reason to charge less than the going price, and if he or she charges more, buyers will make their purchases elsewhere. We assume that markets are perfectly competitive. Because buyers and sellers in perfectly competitive markets must accept the price the market determines, they are said to be price takers.