Chapter+4+The+Market+Forces+of+Supply+of+Demand+JBS

=Chapter 4 The Market Forces of Supply of Demand JBS =   ==**Key Terms:  ** ==

**Market **- a group of buyers and sellers of a particular good or service


 * Competitive market **- a market in which there are many buyers and many sellers so that each has a negligible impact on the market price


 * Quantity demanded **- the amount of a good that buyers are willing and able to purchase


 * Law of demand **- the claim that, other things equal, the quantity demanded of a good falls when the price of the good rises


 * Demand schedule **- a table that shows the relationship between the price of a good and the quantity demanded


 * Demand curve **- a graph of the relationship between the rpice of a good and the quantity demanded


 * Normal good **- a good for which, other things equal, an increase in income leads to an increase in demand


 * Inferior good **- a good for which, other things equal, an increase in income leads to an decrease in demand


 * Substitutes **- two goods for which an increase in the price of one leads to an increase in the demand for the other


 * <span style="font-family: Tahoma,Geneva,sans-serif;">Complements **- Two goods for which an increase in the price of one leads to a decrease in the demand for the other


 * <span style="font-family: Tahoma,Geneva,sans-serif;">Quantity supplied- ** the amount of a good that sellers are willing and able to sell


 * <span style="font-family: Tahoma,Geneva,sans-serif;">Law of supply **- the claim that, other things equal, the quantity supplied of a good rises when the price of the good rises


 * <span style="font-family: Tahoma,Geneva,sans-serif;">Supply schedule **- a table that shows the relationship between the price of a good and the quantity supplied


 * <span style="font-family: Tahoma,Geneva,sans-serif;">Supply curve **- a graph of the relationship between the price of a good and the quantity supplied


 * <span style="font-family: Tahoma,Geneva,sans-serif;">Equilibrium **- a situation in which the market price has reached the level at which quantity supplied equals quantity demanded


 * <span style="font-family: Tahoma,Geneva,sans-serif;">Equilibrium price **- the price that balances quantity supplied and quantity demanded


 * <span style="font-family: Tahoma,Geneva,sans-serif;">Equilibrium quantity **- the quantity supplied and the quantity demanded at the equilibrium price


 * <span style="font-family: Tahoma,Geneva,sans-serif;">Surplus **- a situation in which quantity supplied is greater than quantity demanded


 * <span style="font-family: Tahoma,Geneva,sans-serif;">Shortage **- a situation in which quantity demanded is greater than quantity supplied


 * <span style="font-family: Tahoma,Geneva,sans-serif;">Law of supply and demand **- the claim that the price of any good adjusts to bring the quantity supplied and the quantity demanded for that good into balance

=<span style="color: #008000; font-family: Tahoma,Geneva,sans-serif;">Markets and competition = <span style="font-family: Tahoma,Geneva,sans-serif;"> <span style="font-family: Tahoma,Geneva,sans-serif;">In most markets, each buyer knows that there are several sellers from which to choose, and each seller is aware that one's producer is similar to that offered by others. →As price and quantity are determined by all buyers and sellers as they interact in the marketplace.

The term used for this case is competitive market. <span style="font-family: Tahoma,Geneva,sans-serif;"> -In this case, the markets are assumed to be perfectly competitive.
 * <span style="font-family: Tahoma,Geneva,sans-serif;">So many buyers and sellers are present, so that each has a negligible impact.
 * <span style="font-family: Tahoma,Geneva,sans-serif;">Each seller has limited control over the price because other sellers are offering similar products.
 * <span style="font-family: Tahoma,Geneva,sans-serif;">No single buyer can influence the price because each buyer purchases only a small amount.

1.The goods offered for sale are all exactly the same.

2. Buyers and sellers are so numerous that no single buyer or seller has any influence over the market price.

Because all the sellers and buyers must accept the price the market determines, they are //price takers.//

=<span style="color: #008000; font-family: Tahoma,Geneva,sans-serif;">Demand =

<span style="font-family: Tahoma,Geneva,sans-serif;">The quantity demanded of any good is the amount of the good that buyers are wiling and able to purchase.

Because quantity demanded falls as the price rises as the price falls, we say that the quantity demanded is negatively related to the price.

Law of demand : When the price of a good rises, the quantity demanded of the good falls, and when the price falls, the quantity demanded rises.

Demand Schedule shows the relationship between the price of a good and the quantity demanded.



<span style="font-family: Tahoma,Geneva,sans-serif;">Market demand : The sum of all individual demands for a particular good or service.

The market demand curve shows how the total quantity demanded of a good varies as the price of a good varies, while other values are constant.

Demand slope is downward

-> because demand is negatively related.

<span style="font-family: Tahoma,Geneva,sans-serif;"> =<span style="color: #008000; font-family: Tahoma,Geneva,sans-serif;">Supply = <span style="font-family: Tahoma,Geneva,sans-serif;"> quantity supplied : amount that sellers are willing and able to sell.

When the price of a good is high, the quantity supplied is large.

When the price of a good is low, the quantity supplied is small.

Because then quantity supplied rises as the price rises and falls as the price falls, the quantity supplied is positively related to the price of the good.

Law of supply : Other things equal, when the price of a good rises, the quantity supplied of the good also rises, and when the price falls, the quantity supplied falls as well.

Supply schedule shows the relationship between the price of a good and the quantity supplied.



<span style="font-family: Tahoma,Geneva,sans-serif;">Supply curve is the curve relating price and quantity supplied.

-> slopes upward because it is positively related.

<span style="font-family: Tahoma,Geneva,sans-serif;"> <span style="color: #008000; font-family: Tahoma,Geneva,sans-serif;"> =<span style="color: #008000; font-family: Tahoma,Geneva,sans-serif;">Changes in demand = =<span style="font-family: Tahoma,Geneva,sans-serif;"> = <span style="font-family: Tahoma,Geneva,sans-serif;"> Demand curves are not always stable, because it changes depending on the consumer's buying decisions.

Shift of demand curve to the right would be refer to as //increase in demand//, any changes that reduces the quantity demanded is a //decrease in demand//.

Some determinants of demand shifts:

<span style="font-family: Tahoma,Geneva,sans-serif;">-> If the demand for good falls when income falls, the good is a normal good. -> If the demand for a good rises when income falls, the good is an inferior good.
 * <span style="font-family: Tahoma,Geneva,sans-serif;">Income

<span style="font-family: Tahoma,Geneva,sans-serif;">-> When a fall in the price of a good reduces the demand for another good, the two goods are called substitutes. -> When a fall in the price of one good raises the demand for another good, the two goods are called complements.
 * <span style="font-family: Tahoma,Geneva,sans-serif;">Prices of related goods

<span style="font-family: Tahoma,Geneva,sans-serif;">-> Higher demand was for one's tastes.
 * <span style="font-family: Tahoma,Geneva,sans-serif;">Tastes

<span style="font-family: Tahoma,Geneva,sans-serif;"> <span style="font-family: Tahoma,Geneva,sans-serif;">-> If the number of buyers increase and the quantity demanded also increases, the demand curve would shift to the right. <span style="font-family: Tahoma,Geneva,sans-serif; font-weight: normal;">
 * <span style="font-family: Tahoma,Geneva,sans-serif;">Expectations
 * <span style="font-family: Tahoma,Geneva,sans-serif;">Number of buyers



<span style="font-family: Tahoma,Geneva,sans-serif;">Price increases if demand increases!



<span style="color: #008000; font-family: Tahoma,Geneva,sans-serif;">**Change in Suppl<span style="font-family: Tahoma,Geneva,sans-serif;">y: **
<span style="font-family: Tahoma,Geneva,sans-serif;">Any change that raises quantity supplied at every price shifts the supply curve to the right, is called an increase in supply.

Any change that reduces quantity supplied at every price shifts the supply curve to the left, is called an decrease in supply.

Some determinants of supply shifts: <span style="font-family: Tahoma,Geneva,sans-serif;">

<span style="font-family: Tahoma,Geneva,sans-serif;">-> An increase in the input price would increase the total cost, sloping the supply downward.
 * <span style="font-family: Tahoma,Geneva,sans-serif;"><span style="font-family: Tahoma,Geneva,sans-serif; font-weight: normal;"> Input prices

<span style="font-family: Tahoma,Geneva,sans-serif;">-> Technological developments would raise the supply of a good.
 * <span style="font-family: Tahoma,Geneva,sans-serif;">Technology

<span style="font-family: Tahoma,Geneva,sans-serif;">->
 * <span style="font-family: Tahoma,Geneva,sans-serif;">Expectations

<span style="font-family: Tahoma,Geneva,sans-serif;">-> As the number of sellers increase, quantity supplied would decrease.
 * <span style="font-family: Tahoma,Geneva,sans-serif;">Number of sellers



==<span style="color: #008000; font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;">**<span style="color: #008000; font-family: Tahoma,Geneva,sans-serif;">Demand in Market ** <span style="color: #008000; font-family: Tahoma,Geneva,sans-serif;"> vs. ** Supply in Market ** <span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;"> ==

<span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;">
<span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;">

<span style="font-family: Tahoma,Geneva,sans-serif; font-weight: normal;">
 * <span style="font-family: Tahoma,Geneva,sans-serif; font-weight: normal;">Change in Demand || <span style="font-family: Tahoma,Geneva,sans-serif; font-weight: normal;">Change in Supply ||
 * * Income (Normal vs. inferior goods)
 * Taste
 * Other Prices (Substitutes vs. Complements)
 * number of Consumers
 * Expectations of Future prices
 * Information || * Input Prices
 * Technology
 * Other Prices
 * Number of Sellers
 * Expectations of Future Price
 * Tax and Subsidy ||

<span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;">
<span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;"> <span style="font-family: Tahoma,Geneva,sans-serif;">Equilibrium

There is a point where the demand curve and the supply curve make an intersection. It is called the equilibrium point.

The price at the intersection is the equilibrium price, and the quantity pointed is the equilibrium quantity.

At the equilibrium price, the quantity of the good that buyers are willing and able to buy exactly balances the quantity that sellers are wiling and able to sell.

Equilibrium price is also known as market-clearing price because everyone is satisfied at this point.

It is equilibrium quantity, if the quantity supplied = quantity demanded

If the market price is above the equilibrium price, the quantity supplied > quantity demanded, there is a surplus, or also known as excess supply. ( refer to chapter 6)

If the market price is below the equilibrium price, the quantity supplied < quantity demanded, there is a shortage, or otherwise known as excess demand.

Law of supply and demand : The price of any good adjusts to bring the quantity supplied and quantity demanded for that good into balance.

changes in equilibrium?

1. decide whether the even shifts the supply curve, the demand curve, or both. 2. decide whether the curve shifts to the right or the left. 3. supply-and-demand diagram to compare the initial and the new equilibrium, to see the affects of the shifts.

Shifts in curves and movements along the curve is DIFFERENT.

supply is the position of the supply curve, whereas the quantity supplied refers to the amount suppliers wish to sell. Shift in supply = change in supply movement along the supply = change in quantity supplied <span style="font-family: 'Palatino Linotype','Book Antiqua',Palatino,serif;">

<span style="color: #008000; font-family: Tahoma,Geneva,sans-serif;">
==<span style="color: #008000; font-family: Tahoma,Geneva,sans-serif;"> <span style="font-family: Tahoma,Geneva,sans-serif;">**<span style="color: #008000; font-family: Tahoma,Geneva,sans-serif;">Conclusion: ** == <span style="font-family: Tahoma,Geneva,sans-serif;">

<span style="font-family: Tahoma,Geneva,sans-serif;">
<span style="font-family: Tahoma,Geneva,sans-serif;"> media type="youtube" key="qdOqAWo8vFw" height="344" width="425"

<span style="color: #ff0000; font-family: Tahoma,Geneva,sans-serif;">Bibliography: <span style="color: #000000; font-family: Tahoma,Geneva,sans-serif;"> http://www.mbs.edu/home/jgans/mecon/value/Popups/pop_up_changes_in_slope_parameters.htm http://www.themicroeconomics.com/demand_supply_and_market_prices.html