ECON 1B03 Lecture Notes - Lecture 3: Market Power, Inferior Good, Perfect Competition

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14 Oct 2018

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ECON 1B03 Full Course Notes

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Market is a group of buyers and sellers of a particular good or service. The terms supply and demand refer to the behaviour of people as they interact with one another in markets. Market demand refers to the sum of all individual demands for good or service. Market supply refers to the sum of all individual supplies of a particular good or service. Firms can freely enter or exit the market. Buyers and sellers are numerous that no individual consumer or firm can affect the market price -- each is a price taker. Quantity demanded (qd) : the amount of a good or service that consumers are willing and able to buy. Other things being equal, when the price of a good rises, the quantity of demanded that good falls. Normal good: when income increases, demand increases and vice versa. Inferior good: when income increases, demand decreases and vice versa.

Related Questions

The market demand curve

a. slopes upward.

b. is found by vertically adding the individual demand curves.

c. represents the sum of the quantities demanded by all the buyers at each price of the good.

d. represents the sum of the prices that all the buyers are willing to pay for a given quantity of the good.

When we move along a given demand curve,

all nonprice determinants of demand are held constant.

only price is held constant.

all determinants of quantity demanded are held constant.

d. income and price are held constant.

When the price of a good or service changes,

	a.	there is a movement along a given demand curve.
	b.	the demand curve shifts in the opposite direction.
	c.	the supply curve shifts in the opposite direction.
	d.	the demand curve shifts in the same direction.

1. In a competitive market, the quantity of a product produced and the price of the product are determined by

a. buyers.

b. sellers.

c. both buyers and sellers.

d. None of the above is correct.

2. Which of the following statements is correct?

a. Buyers determine supply and sellers determine demand.

b. Buyers determine demand and sellers determine supply.

c. Buyers determine both demand and supply

d. Sellers determine both demand and supply

3. The demand for a good or service is determined by

a. those who buy the good or service

b. the government.

c. those who sell the good or service.

d. both those who buy and those who sell the good or service.

4. An increase in supply is represented by

a. a movement downward and to the left along a supply curve.

b. a movement upward and to the right along a supply curve.

c. a rightward shift of a supply curve.

d. a leftward shift of a supply curve

ceruleanseal203

The generalized demand and supply functions for good X are

Qd = 10 -2Px - 4P_Y + M Qs = 10 + 2P_X

Where:

Q_D = quantity demanded of good X

P_X = price of good X

M = consumer income

P_Y = price of good Y

Q_S = quantity supplied of good X

P_X = price of good X

A. Are good X and good Y substitutes or complements? Why?

B. Is good X a normal good or an inferior good? Why?

C. What is the demand function when P_Y = $4 and M = $600?

d. Use the demand function you found in part c. and solve for the equilibrium price (P_o) and the equilibrium quantity (Q_o).

e. Find the inverse demand function and the inverse supply function.

f. Sketch this market.

periwinklechimpanzee73

ECON 1B03 Lecture Notes - Lecture 3: Market Power, Inferior Good, Perfect Competition

ECON 1B03 Full Course Notes

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