Textbook Notes (363,472)
Canada (158,372)
Economics (800)
ECON 2310 (47)
Chapter 14

Chapter 14 Intermediate Micro Notes

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University of Guelph
ECON 2310
Johanna Goertz

Chapter 14 Economics NotesEquilibriumEfficiency141 What Makes a Market CompetitiveUsually a consumers demand for a good or a firms demand for input is just a tiny fraction of the overall amount boughtsold A change in amount consumer or firm purchases has little effect on the balance between total supplydemand Therefore price remains virtually unchanged Usually reasonable to assume that buyers are price takersPerfectly competitive market means buyerssellers have n effect on priceWhat causes perfectly competitive market1 Absence of transactions costs Buyers can easily locate supplierslearn their prices2 Product Homogeneity If its the same product its the same price at all firms3 Largeof sellers who each account for small amount of market supply Few markets are perfectly competitive eg Wheat But many markets are highly competitivebehave in similar ways142 Market DemandMarket SupplyMarket Demand The sum of the demands of all the individual consumers Graphically the curve is the horizontal sum of the individual demand curves To find market demand in short run we add up consumers shortrun demand curves To find market demand in longrun we add up consumers longrun demand curvesMarket Supply The sum of all the individual sellers supplies Graphically the market supply curve is the horizontal sum of the individual supply curvesShortRun Vs LongRun Market Supply In the short run only those firms that are currently active in the market can produce outputShort run market supply curve found by summing the short run supply curves of A
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