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The Market Forces of Supply and Demand - Coggle Diagram
The Market Forces of Supply and Demand
Market and competition
economic interaction
Trade can make everyone better off – allow countries to specialise in what they do best and to enjoy a wider variety of goods and services
Markets are usually a god way to organise activity – invisible hand leads market to desirable outcomes
Government can sometimes improve market outcomes – sometime markets fail to allocate resources efficiently because of externality and market power
Supply and demand are the forces that make market economies work.
A market is a group of buyers and sellers of a particular good or service
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.
perfect competition
Products are the same
Numerous buyers and sellers so that each has no influence over price
Buyers and Sellers are price takers
oligopoly
Few sellers
Not always aggressive competition
demand
Quantity demanded is the amount of a good that buyers are willing and able to purchase
Law of Demand
When the price of a good rises, the quantity demanded will fall.
consumer income
As income increases the demand for a normal good will increase.
As income increases the demand for an inferior good will decrease.
supply
Quantity supplied is the amount of a good that sellers are willing and able to sell.
The law of supply states that, other things equal, the quantity supplied of a good rises when the price of the good rises.
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.