ECON 111 Chapter Notes - Chapter 4: Fudge, Normal Good, Inferior Good
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4 the market forces of supply and demand. 1. over the price: because buyers and sellers in perfectly competitive markets accept the price the market determines, they are called price takers, however, not all goods and services are sold in perfectly competitive markets. Some markets have only one seller (they would be the price setter). Cable tv: perfectly competitive markets are the easiest to analyze. There are so many buyers and sellers that no single buyer or seller has control. If people"s incomes decreased, they would be less inclined to drive or take a cab, so they would take the bus) Prices of related goods - when a fall in the price of one good reduces the. 1. demand for another good, the two goods are called substitutes (ex. Hot fudge and ice cream, lower price of hot fudge = higher demand for ice cream because they go together)
