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Chapter 4

Principles of Macro [Mankiw, Kneebone, McKenzie] - Chapter 4 Notes

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ECON 2020U
Peter Cheung

ECON2020Chapter 4 Notes THE MARKET FOCUS OF SUPPLY AND DEMAND Markets and CompetitionWhat is a MarketMarketa group of buyers or sellers in of a particular good or serviceBuyers as a group determine the supply of a productSellers as a group determine the demand of a productSome markets are very organized and structured where the members of the group meet to establish quantity quality and price of the goods or services suppliedMore often markets are not so organizedEven though most markets are largely unorganized they still form a market because there is still a group of sellers and buyersWhat is CompetitionCompetitive Marketa market in which there are many buyers and many sellers so that each has a negligible impact on the market pricePrice and demand are determined by all of the buyers in the market without intended collaborationSince each buyer in this market only purchases a small amount they cannot alone influence the market price of that good or serviceA perfectly competitive market is such thatthe goods offered for sale are all exactly the same in qualitythe buyers and sellers are so numerous that no single buyer or seller has any influence on the market pricePrice Takersbuyers and sellers in perfectly competitive markets who must just accept the market price of a good because they alone cannot influence itMonopolyA market opposite to a perfectly competitive market A monopoly is such that one seller supplies the entire market and so can freely set the price of the good or serviceDemandThe Demand Curve The Relationship between Price and Quantity DemandQuantity Demandedthe amount of a good that buyers are willing and able to purchaseLaw of Demandthe claim that other things equal the quantity demanded of a good falls when the price of the good risesDemand Schedulea table that shows the relationship between the price of a good and the quantity demanded
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