1. Ch 4 Market Forces of Supply and Demand S + D forces that make market economies work Determine Q produced and P Refer to behavior of people as they interact in markets Perfectly Competitive Markets –7 conditions –Does NOT exist…..just a model

2. All goods are the same (identical) Many buyers and sellers No one person can influence the market (negligible impact) No market power Price Taker Free Entry/Exit into market All buyers and sellers have equal access to same technology and information

3. Imperfect Competition (3 ex’s) Monopoly Oligopoly Monopolistically Competitive ECONOMETRICS- When it is not possible to conduct a controlled experiment, economists attempt to provide evidence of a factor’s causal effect……. The application of statistical and mathematical theories to economics for the purpose of testing hypotheses and forecasting future trends. Econometrics takes economic models and tests them through statistical trials. The results are then compared and contrasted against real- life examples.

4. Can you read a graph? DEMAND QD look at graphs in book Amount of a good buyers are willing and able to purchase D schedule vs. D curve Individual D vs. Market D. Horizontal Summation

5. Determinants of D Price -Law of Demand – -Ceteris paribus A Change in Price = ? A MOVEMENT along D curve

6. Non Price-Determinants “Curve Shifters” Income (Normal, Inferior) give ex’s P of Related Goods (Substitutes, Compliments) give ex’s Tastes Expectations of future prices # of Buyers

7. Price = Movement along D curve = QD of any other determinant = Shift curve = D Shift Right Shift Left At any given Price, the amount Demanded is greater or less.

8. Ceteris Paribus All else equal Know what is held constant, what is not