Ch 4 Market Forces of Supply and Demand S + D forces that make market economies work Determine Q produced and P Refer to behavior of people as they interact in markets Perfectly Competitive Markets –7 conditions –Does NOT exist…..just a model

All goods are the same (identical) Many buyers and sellers No one person can influence the market (negligible impact) No market power Price Taker Free Entry/Exit into market All buyers and sellers have equal access to same technology and information

Imperfect Competition (3 ex’s) Monopoly Oligopoly Monopolistically Competitive DEMAND QD look at graphs in book Amount of a good buyers are willing and able to purchase D schedule vs. D curve Individual D vs. Market D. Horizontal Summation

Determinants of D Price -Law of Demand – -Ceteris paribus A Change in Price = ? A MOVEMENT along D curve

Non Price-Determinants “Curve Shifters” Income (Normal, Inferior) give ex’s P of Related Goods (Substitutes, Compliments) give ex’s Tastes Expectations of future prices # of Buyers

Price = Movement along D curve = QD of any other determinant = Shift curve = D Shift Right Shift Left At any given Price, the amount Demanded is greater or less.

Ceteris Paribus All else equal Know what is held constant, what is not