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Economics (923)
ECN 104 (388)
Chapter 4

Chapter Four Notes.docx

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Ryerson University
ECN 104
Frank Trimnell

ChapterFourNotes: THREE QUESTION ON EXAM: Markets and Competition Market- a group of buyers and sellers of a particular product Competitive Market- one with many buyers and sellers Perfectly Competitive: -All goods are exactly the same -Each player is a “price taker” (meaning there are so many buyers and sellers that no one can affect market price) Demand Quantity demanded- the amount of the good buyers are willing to purchase **difference between demand (change in income, price of related goods, or taste) and quantity demanded (change in price) – change in quantity demanded is moving along the demand curve, change in demand is a shift of the curve to the left or right** Law of demand- quantity demanded of a good falls when the price of a good rises (ceteris parabis) Demand Schedule: relationship between the price of a good and quantity demanded Price Quantity of of lattes lattes demanded $0.00 16 1.00 14 2.00 12 3.00 10 4.00 8 5.00 6 6.00 4 Market Demand versus Individual Demand: The quantity demanded in a market is the sum of all quantities demanded by all buyers at each price Demand Curve Shifts: Demand for a normal good is positively related to income (quantity demanded at each price shifts right) Demand for an inferior good is negatively related to income (quantity demanded at each price shifts left) Substitutes- an increase in the price of one causes an increase in demand for the other (An increase in the price of pizza increases demand for hamburgers, shift
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