2. A market is an institution in which buyers and sellers exchange goods and services for a medium of exchange --money Markets, demand, and supply

3. Definitions: 4Demand: The quantities of a good or service buyers are willing (and able) to buy at alternative market prices, ceteris paribus. 4Quantity demanded: The quantity of a good or service buyers are willing (and able) to buy at a specific price, ceteris paribus. 4Demand curve: The schedule indicating the quantities demanded of a good or service at alternative market prices, ceteris paribus. 4Law of demand: ceteris paribus, price and quantity demanded of a good or service are negatively related What is demand?

4. When it comes to the question of how much people are willing to buy of a good or service, price is clearly a factor. However, there are important non-price determinant of demand as well. These include: 8The price of substitute goods 8The price of complementary goods 8Consumer income 8Tastes and preferences

5. The demand for pineapple depends on: + The price of pineapple + The price of cantaloupe + The price of bananas + Consumer income + Consumer tastes As we move along the demand curve for, all factors are held constant except the price of pineapple The demand for pineapple

6. Quantity 0 Price D P2P2 P1P1 q1q1 q2q2 Why is the demand curve downward sloping? Because of the substitution effect

7. Here we derive the market demand curve by summing up the individual demand curves for pineapple

8. Market demand Price ($) Quantity 0361012 1.00 1.50 2.00 2.50 Anita BO 74

9. Price 0 A B H D1D1 D2D2 P1P1 P2P2 q1q1 q2q2 Quantity Demand could shift right due to: ÔIncrease in the price of substitutes ÔDecrease in the price of complements ÔIncrease in income ÔChange of tastes and preferences

10. Price 0 A B H D0D0 D1D1 P1P1 P2P2 q1q1 q2q2 Quantity Demand could shift left due to:  Decrease in the price of substitutes  Increase in the price of complements  Decrease in income  Change of tastes and preferences

11. The supply curve is the schedule indicating the quantities of a good or service sellers are willing to offer for sale at alternative market prices, ceteris paribus

12. The supply of salmon

13. Quantity (lbs) Price/lb 0 $2.50 $6.50 $3.50 $4.50 $5.50 200400550670 Supply

14. Quantity (lbs) Price/lb 0 $2.50 $6.50 $3.50 $4.50 $5.50 200400550670 Supply 750900 Demand Note that supply is equal to demand at a price of $5.50

15. Quantity Price 0 S1S1 S2S2 D B A P1P1 P2P2 q1q1 q2q2 S 1 to S 2 explained by: good weather increase in the number of sellers decrease in input prices (machinery, fertilizer, labor, etc.)