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Canada (162,359)
Psychology (860)
PSY 105 (152)
Chapter 4

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PSY 105
Kristin Vickers

Chapter 4 – The Market Forces of Supply and Demand MARKETS AND COMPETITION What is Competition? -70 • Market: group of buyers and sellers of a particular good or service • Buyers determine demand ; sellers determine supply • Competitive market: many buyers and sellers neither has effect on market price • Perfectly competitive: higest form of competition; two characteristics [1] all goods offered are exactly the same [2] numerous buyers and sellers so neither has influence on market price  price takers DEMAND The Demand Curve: The Relationship between Price and Quantity Demanded • Quantity demanded: amount of good that buyers are willing and bale to buy • Negatively related to price  law of demand price rises QD falls • Table – demand schedule ; graph -> demand curve • Market demand curve  sum of all the individual demands for a particular good or service (see page 73 for example) Income • Normal good: demand of good falls when income falls ie. Ice cream • Inferior good: demand of good rises when income falls ie. Bus rides • Wealth effect: the impact of changes in wealth on both the amount and composition of goods that individuals consume Prices of related goods • Substitutes: price of one good reduces the demand for another good ie. Ice cream and frozen yogurt • Complements: goods
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