EC120 Chapter Notes - Chapter 4: Economic Equilibrium, Demand Curve, Market Power
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EC120 Full Course Notes
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Document Summary
Economists use the model of supply and demand to analyze competitive markets. In a competitive market there are many buyers and sellers each of whom has little or no influence on the market price. The demand curve shows how the quantity of a good demanded depends on the price. According to the law of demand as the price of a good falls, the quantity demanded rises. In addition to price other determinants of how much consumers want to buy include income the prices of substitutes and complements tastes, expectations and the number of buyers. If one of these factors changes the demand curve shifts. The supply curve shows how the quantity of a good supplied depends on the price. According to the law of supply as the price of a good rises the quantity supplied rises. Addition to price, other determinants of how much producers want to sell include input prices, technology, expectations and the number of sellers.
