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Published byRolf Alexander Curtis Modified over 9 years ago
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Supply and Demand
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The Market Forces of Supply and Demand uSupply and demand are the forces that make market economies work. uMicroeconomics is basically about supply, demand, and market equilibrium.
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Teach a parrot to say “supply and demand” and you have an economist
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Markets uA market is a group of buyers and sellers of a particular good or service. uThe terms supply and demand refer to the behavior of people... as they interact with one another in markets.
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Markets u Buyers determine demand. u Sellers determine supply.
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Demand Quantity demanded is the amount of a good that buyers are willing and able to purchase.
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Law of Demand The law of demand states that there is an inverse relationship between price and quantity demanded.
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Demand Schedule The demand schedule is a table that shows the relationship between the price of the good and the quantity demanded.
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The demand curve slopes downward because, ceteris paribus, lower prices imply a greater quantity demanded! An individual’s demand curve represents the marginal utility (additional benefit) received from each incremental unit of the good. The decreasing satisfaction gained from additional units of a good consumed in a given period is call the law of diminishing marginal utility
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Diminishing marginal utility explains the inverse relationship between prices and the quantity demanded in the law of demand …demand
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Mr. Letsos’s Demand Schedule
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Mr. Letsos’s Demand Curve $3.00 2.50 2.00 1.50 1.00 0.50 24681012 Price of Ice-Cream Cone Quantity of Ice-Cream Cones 0
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WHOA! YES PRICE WILL ALWAYS GO VERTICAL (Y-AXIS) AND QUANTITY WILL GO HORIZONTAL (X-AXIS)
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Mr. Tyllick’s Demand Schedule
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Mr. Tyllick’s Demand Curve $3.00 2.50 2.00 1.50 1.00 0.50 Price of Ice-Cream Cone Quantity of Ice-Cream Cones
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Total Market Demand Curve $3.00 2.50 2.00 1.50 1.00 0.50 Price of Ice-Cream Cone Quantity of Ice-Cream Cones
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Not only capitalism here folks But PC (perfect competition or pure competition) More to come on this, but for now: Many small firms Same product No entry/exit costs
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