Macro Economics, Week4 Notes
Macro Economics, Week4 Notes ECON 2220-004
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This 2 page Class Notes was uploaded by Johanna Glaser on Friday September 16, 2016. The Class Notes belongs to ECON 2220-004 at University of Nebraska at Omaha taught by R. Metz in Fall 2016. Since its upload, it has received 30 views.
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Date Created: 09/16/16
Week 4 Chapter 4: The Market Forces of Supply and Demand What is a Market? Market: any place where buyers & sellers meet & interact Types: Goods & Services Productive resources Money & financial assets Vocal, domestic, international In person, electronic, etc. Buyers determine demand for product Sellers determine the supply for product Competitive Market: Many buyers & sellers Both has negligible impact on price Price & quantity are determined by all buyers & sellers as they interact in the market place Perfectly Competitive Market: Goods offered for sale are exactly the same Buyers & sellers are numerous o Price takers o No single person has influence At Market Price o Buyers can buy all they want o Sellers can sell all they want Monopoly: only one seller who sets the price Demand: curve that shows the amount of product consumers are willing & able to purchase at possible prices Law of Demand: Decrease in price leads to increase in quantity demanded & vice versa Pri ce Demand Curve Qu anti ty Reasons for Inverse Relationships: Substitution: buy cheaper goods over higher price goods Income: decrease in price is tantamount (same as) to an increase in income Marginal Utility Theory: as successive units of a product are consumed, the extra unit will yield diminishing amounts of extra satisfaction Change in Quantity Demanded: a change in the price of that product Change in Demand: moves the actual demand curve o Change in anything other than price o Income Normal goods: as income increases, demand increases (clothing, steak) Inferior goods: as income increases, demand decreases (goodwill clothes, bus) Number of buyers as buyer’s increase, so does Demand Price of Related Goods: change in the price of related goods may increase or decrease Demand for a Good depending if Good is a substitute o Substitute: goods with the relationship that a decrease in the price of Good “A” results in an increase in quantity of Good “B” Prices: Signals that guide the allocation of resources Mechanism for rationing scarce resources Determine who produces each good & how much is produced Voluntary market transactions leave all participants better off
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