1. Supply and Demand How Markets Work?

2. MARKETS AND COMPETITION The terms supply and demand refer to the behavior of people......as they interact with one another in markets. The terms supply and demand refer to the behavior of people......as they interact with one another in markets. A market is a group of buyers and sellers of a particular good or service. A market is a group of buyers and sellers of a particular good or service. Buyers determine demand... Buyers determine demand... Sellers determine supply… Sellers determine supply… The terms supply and demand refer to the behavior of people......as they interact with one another in markets. The terms supply and demand refer to the behavior of people......as they interact with one another in markets. A market is a group of buyers and sellers of a particular good or service. A market is a group of buyers and sellers of a particular good or service. Buyers determine demand... Buyers determine demand... Sellers determine supply… Sellers determine supply…

3. Competitive Markets A Competitive Market is a market with many buyers and sellers so that each has a small impact on the market price.

4. Types of Competition  Perfectly Competitive:  Homogeneous Products  Buyers and Sellers are Price Takers  Monopoly:  One Seller, controls price  Oligopoly:  Few Sellers, not aggressive competition  Monopolistic Competition:  Many Sellers, differentiated products  Perfectly Competitive:  Homogeneous Products  Buyers and Sellers are Price Takers  Monopoly:  One Seller, controls price  Oligopoly:  Few Sellers, not aggressive competition  Monopolistic Competition:  Many Sellers, differentiated products

5. Perfectly Competitive perfect competition describes markets such that no participants are large enough to have the market power to set the price of a homogenous product

6. Monopoly a specific person or enterprise is the only supplier of a particular commodity.

7. Oligopoly An oligopoly is a market form in which a market or industry is dominated by a small number of sellers. Because there are few sellers, each oligopolistic is likely to be aware of the actions of the others. The decisions of one firm influence, and are influenced by, the decisions of other firms An oligopoly is a market form in which a market or industry is dominated by a small number of sellers. Because there are few sellers, each oligopolistic is likely to be aware of the actions of the others. The decisions of one firm influence, and are influenced by, the decisions of other firms

8. Monopolistic Competition Monopolistic competition is imperfect competition where many competing producers sell products that are differentiated from another. In monopolistic competition, a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other firms Monopolistic competition can naturally fall into a monopoly Monopolistic competition is imperfect competition where many competing producers sell products that are differentiated from another. In monopolistic competition, a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other firms Monopolistic competition can naturally fall into a monopoly

9. SUPPLY AND DEMAND TOGETHER Equilibrium refers to a situation in which the price has reached the level where quantity supplied equals quantity demanded.

10. Equilibrium Equilibrium Price –The price that balances quantity supplied and quantity demanded. –On a graph, it is the price at which the supply and demand curves intersect. Equilibrium Quantity –The quantity supplied and the quantity demanded at the equilibrium price. –On a graph it is the quantity at which the supply and demand curves intersect. Equilibrium Price –The price that balances quantity supplied and quantity demanded. –On a graph, it is the price at which the supply and demand curves intersect. Equilibrium Quantity –The quantity supplied and the quantity demanded at the equilibrium price. –On a graph it is the quantity at which the supply and demand curves intersect.

11. At $2.00, the quantity demanded is equal to the quantity supplied! Demand Schedule Supply Schedule Equilibrium

12. Equilibrium price Demand Supply $2.00 68100 Equilibri um Equilibrium quantity Quantity of Ice- Cream Cones Price of Ice-Cream Cone 421357911 The Equilibrium of Supply and Demand

13. Equilibrium Surplus –When price > equilibrium price, then quantity supplied > quantity demanded. There is excess supply or a surplus. Suppliers will lower the price to increase sales, thereby moving toward equilibrium. Shortage –When price the quantity supplied. There is excess demand or a shortage. Suppliers will raise the price due to too many buyers chasing too few goods, thereby moving toward equilibrium. Surplus –When price > equilibrium price, then quantity supplied > quantity demanded. There is excess supply or a surplus. Suppliers will lower the price to increase sales, thereby moving toward equilibrium. Shortage –When price the quantity supplied. There is excess demand or a shortage. Suppliers will raise the price due to too many buyers chasing too few goods, thereby moving toward equilibrium.

14. Demand Supply $2.00 68100 Quantity of Ice-Cream Cones Price of Ice-Cream C one 421357911 $2.50 Surplus Quantity Demanded Quantity Supplied Excess Supply Excess Supply

15. Demand Supply $2.00 68100 Quantity of Ice-Cream Cone Price of Ice-Cream Cone 421357911 $1.50 Shortage Quantity Supplied Quantity Demanded Excess Demand Excess Demand

16. Assignment