A competitive market is a market in which there are many buyers and sellers of the same good or service, none of whom can influence the price at which the good or service is sold. More precisely, the key feature of a competitive market is that no individual’s actions have a noticeable effect on the price at which the good or service is sold. Important to understand however, that this is not an accurate description of every market.
Supply and demand model is a model of how a competitive a market works • Five keys elements:
• The demand curve
• Supply curve
• The set of factors that cause the demand curve to shift and the set of factors hat cause the supply curve to shift o The market equilibrium, which includes the equilibrium price and equilibrium quantity o The way the market equilibrium changes when the supply curve or demand curve shifts Demand schedule ( demand curve
The Demand Schedule and the Demand Curve
Demand schedule – a table showing how much of a good or service consumers will be willing and able to buy at different prices.
Quantity demanded is the actual amount of a G%S consumers are willing able to buy at some specific price Demand curve – is a graphical representation of the demand schedule. It shows the relationship between quantity demanded and price.
Law of demand – says the higher price for a good or service, all other things being equal, leads people to demand a smaller quantity of that good or service.
Shift of the Demand Curve
Answer lies in crucial phrase – “all other things being equal”
Change in demand – is a shift of the demand curve, which changes the quantity demanded at any given price Movement along the demand curve – is a change in the quantity demanded of a good that is the result of a change in that good’s price.
Five principal factors that shift the demand curve for a G & S: • Change in the prices of related goods or services
• Changes in income...
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