Notes of Economics

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A market is a situation where potential buyers are in contact with potential sellers. A market is any place, physical or virtual, where the buyer and seller (of goods and services) meet. Market can be local, where buyers and sellers are from the surrounding area. Markets can be national, where the participants are from within the market country. Markets can be international, where the market participants come from any country in the world. Resource market

Households sell
Business buy
Product market
Households buy
Business sell
Businesses
Buy resources
Sell products
Households
Sell resources
Buy products
Costs
Money income
Goods and services
Labor, land
Resources
Goods and services
Revenue
Consumption expenditures
Resource market
Households sell
Business buy
Product market
Households buy
Business sell
Businesses
Buy resources
Sell products
Households
Sell resources
Buy products
Costs
Money income
Goods and services
Labor, land
Resources
Goods and services
Revenue
Consumption expenditures

Market structures:
* Perfect competition
* Monopolistic competition
* Oligopoly
* Monopoly
Remember that these are models, simplified representation of reality. (EX: Perfect competition has always been considered highly theoretical.) Structure characteristics:
* Number of firms
* Type of products (homogeneous (identical), heterogeneous (differentiated) * Barriers of entry (freedom of entry and exit)
* Price-setting power (Firms level of market power)
* Non-price competition

Obstacles that limit the ability of new firms to enter a particular industry Examples:
* Legal barriers
* Patents and copyright
* Import restrictions
* Control over an essential resource
* Financial barriers
* Access to marketing and distribution channels
* Significant Economies of Scale
* Influences over market demand
* Brand loyalty
* Early market entry (high information cost of switching to a competitor

MARKETStructure characteristics| Perfect competition| Monopolistic competition| Oligopoly| Monopoly| Number of firms| Very many| Many| Few, interdependent (few dominate)| One| Type of products| Homogeneous or identical| Heterogeneous or differentiated| Homogeneous or heterogeneous, depending on industry| Unique – no close substitutes| Ease to entry| Free or easy, no barriers| Relatively easy, few barriers| Significant| Major or blocked| Price-setting power| None (price – taker)| Varies, generally little| Significant | Exceptional| Non-price competition| None by firms| Some| Very little or expensive depending on the industry| Public relations| Examples| Agricultural commondities (Wheat, coffee)| Restaurants, books| Airlines, beer, automobiles| Local (public) utilities (water, gas)|

DEMAND
Demand is a consumer’s willingness and ability to buy a product or a service at a particular time and place. Anna’s demand schedule for telephone calls|
Price| Quantity|
$0| 30|
$0.50| 25|
$3.5| 7|
$7| 3|
$10| 1|
$15| 0|
* A demand schedule is a table showing how much of a given product a buyer would be willing to buy at different price. * The demand curve is a graph illustrating how much of a given product a buyer would be willing to buy a different prices

The law of demand
The law of demand describes the relationship between price and quantity. It says that all else being equal, more items will be sold at a lower price than at a higher price. The law of demand states that there is a negative, or inverse, relationship between price and the quantity of a good demanded at its price. If the price increases, the quantity decreases. If the price decreases, the quantity increases. Shift of demand versus movement along a demand curve

* A change in demand is not the same a change in quantity...
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