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Micro Chapter 4A
The Market Forces of Supply and Demand
| Question | Answer |
|---|---|
| A market... | is a group of buyers and sellers of a particular product. Examples: Agricultural market (wheat, corn), automobile market. |
| Buyers... | demand a product. |
| Sellers... | supply a product. |
| A competitive market is... | one with many buyers and sellers, each with an insignificant effect on price. |
| IIn a competitive market no single buyer or seller can influence price or quantity bought/sold. True or False. | True. You (a buyer) cannot influence price=> you buy only small amount. |
| Can a seller charge higher price to influence a competitive market? | Because no single seller can also control prices – you simply buy your product at a lower price elsewhere. |
| In a perfectly competitive market: | All goods exactly the same. Buyers & sellers so numerous that no one can affect market price—each is a “price taker”, Buyers buy all they want, sellers can sell all they want. |
| The quantity demanded of any good is: | the amount of the good that buyers are willing and able to purchase. |
| Law of demand: | quantity demanded of a good falls when the price of the good rises, other things equal |
| Example of Law of Demand: | Price of lattes go up to $5, buy less lattes. Maybe buy tea? Price goes down to $3, buy more lattes. |
| Demand schedule: | a table that shows the relationship between the price of a good and the quantity demanded |
| The quantity demanded in the market... | is the sum of the quantities demanded by all buyers at each price. |
| The demand curve shows | how price affects quantity demanded, other things being equal. |
| "Other things” are things that determine buyers’ demand for a good, other than the price. Changes in these other factors: | shift the demand curve left or right. |
| Changes in price DO NOT shift the demand curve. True or False. | True. |
| A change in the quantity demanded | is a change in the quantity of a good that people plan to buy that results from a change in the price of the good. |
| A change in demand | is a change in the quantity that people plan to buy when any influence other than the price of the good changes. Price is constant here. |
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