ECON 2310 Chapter Notes - Chapter 14: Competitive Equilibrium, Longrun

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Usually a consumers demand for a good, or a firm"s demand for input, is just a tiny fraction of the overall amount bought/sold. A change in amount consumer or firm purchases has little effect on the balance between total supply & demand. Usually reasonable to assume that buyers are price takers. Perfectly competitive market means buyers & sellers have n effect on price. But many markets are highly competitive & behave in similar ways. Few markets are perfectly competitive (eg. wheat) Market 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 short-run demand curves. To find market demand in long-run, we add up consumers long-run demand curves. Market supply: the sum of all the individual sellers supplies. Graphically, the market supply curve is the horizontal sum of the individual supply curves.

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