Supply and Demand by cL9Y259B

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									            Supply and Demand

Market: A group of buyers and sellers of an
individual good or service.
 May not refer to a single geographic place.

Competitive Market: A market in which
there are many buyers and many sellers so
that each has a negligible impact on the
market price.

Perfectly Competitive Market:
 Homogeneous Product
 Buyers and sellers are price takers.

Other Market Forms:
 Monopoly: One seller.
 Oligopoly: Only a few sellers.
 Monopolistic Competition: Differentiated
   products.
 Monopsony: Only one buyer.
                  Demand
Demand: The amount of a good or service
that buyers are willing and able to buy at a
particular price.
Individual Demand
Market Demand
Determinants of Individual Demand
 Price of this good: Law of Demand.
 Prices of Related Goods
   Compliments and Substitutes
 Income
   Normal goods
   Inferior goods
 Tastes
 Expectations
   Future income
   Future price of the good in question
   Future prices of other goods
Movements along demand curve
      (change in quantity demanded)
Shifts in demand curve (change in demand)
    Pencil Demand

         IBM

Price Quantity Demanded
$0.05         650
$0.10         500
$0.15         350
$0.20         200
$0.25          50

       Prudential

Price Quantity Demanded
$0.05         350
$0.10         300
$0.15         250
$0.20         200
$0.25         150
         Market Demand

         IBM   Prudential Market
Price
        Demand Demand Demand
$0.05     650     350      1000
$0.10     500     300       800
$0.15     350     250       600
$0.20     200     200       400
$0.25      50     150       200
                    Supply
Supply: The amount of a good or service
that sellers are willing and able to sell at a
particular price
Individual Supply
Market Supply
Determinants of Individual Supply
 Price: Law of Supply
 Input Prices
 Technology
 Expectations
   Future price of the good in question
Movements along a supply curve
      (change in the quantity supplied)
Shifts in a supply curve (change in supply)
     Pencil Supply

        Staples

Price Quantity Supplied
$0.05        160
$0.10        220
$0.15        280
$0.20        340
$0.25        400

      Office Max

Price Quantity Supplied
$0.05        240
$0.10        280
$0.15        320
$0.20        360
$0.25        400
         Market Supply

Price   Staples   Office   Market
        Supply     Max     Supply
                  Supply
.05      160       240      400
.10      220       280      500
.15      280       320      600
.20      340       360      700
.25      400       400      800
          Equilibrium

 Equilibrium Price: $0.15/Pencil
Equilibrium Quantity: 600 Pencils

   Pencils bought by IBM: 350
Pencils bought by Prudential: 250
   Pencils sold by Staples: 280
 Pencils sold by Office Max: 320
Price




Pe




        Qe
             Quantity
Critically analyze the following argument
that might be put forth by a journalist.

"New discoveries of oil reserves tend to
reduce crude oil prices. However, such
discoveries may be a bad development. The
resulting decrease in price will stimulate
demand and the increase in demand may
cause the price to skyrocket. The price of
oil may therefore wind up higher than it was
before the new discoveries."

								
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