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Week3: The Market Forces of Supply and Demand - Coggle Diagram
Week3: The Market Forces of Supply and Demand
DEMAND
Quantity demanded is the amount of a good that buyers are willing and able to purchase.
Law of Demand
Demand Schedule
The demand schedule is a table that shows the relationship between the price of the good and the quantity demanded.
Demand Curve
The demand curve is a graph of the relationship between the price of a good and the quantity demanded.
Change in Quantity Demanded
Movement along the demand curve.
Caused by a change in the price of the product
Change in Demand
A shift in the demand curve, either to the left or right.
As income increases the demand for a normal good will increase.
As income increases the demand for an inferior good will decrease.
MARKETS AND COMPETITION
A market is a group of buyers and sellers of a particular good or service.
Buyers determine demand.
Sellers determine supply
Perfect Competition
Products are the same
Numerous buyers and sellers so that each has no influence over price
A competitive market is a market in which there are many buyers and sellers so that each has a negligible impact on the market price.
Monopoly
One seller, and seller controls price
Oligopoly
Few sellers
Not always aggressive competition
Monopolistic Competition
Many sellers
Slightly differentiated products
Each seller may set price for its own product
SUPPLY
Quantity supplied is the amount of a good that sellers are willing and able to sell.
Supply Schedule
Supply Curve
Surplus
When price > equilibrium price, then quantity supplied > quantity demanded.
Shortage
When price < equilibrium price, then quantity demanded > the quantity supplied.
The supply curve shows how the quantity of a good supplied depends upon the price.
Market equilibrium is determined by the intersection of the supply and demand curves.
To analyze how any event influences a market, we use the supply-and-demand diagram to examine how the event affects the equilibrium price and quantity.