ECON 160 Lecture Notes - Lecture 4: Frozen Yogurt, Normal Good, Demand Curve
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6 Sep 2016
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Chapter 4: market forces of demand and supply. Market (for a particular good): a group of buyers and sellers for a particular good. Competitive market: many buyers and sellers; no buyers or seller has market power. Many buyers and sellers, each one has negotiable impact in price. Buyer: one buyer can"t change price; price takers: seller can sell to someone willing to pay the higher price. Quantity demanded: for any good is the amount of good that buyers are willing and able to purchase: must be able there may not be enough. Law of demand: other things are equal; when the price of a good increases, the quantity demanded for that good decreases: negative relationship between price and quantity demanded, demand schedule: table showing prices and quantity demanded. Market: sum of individuals in the market. Market dd curve: sum of the individual quantities demanded at each price.
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The following table contains the demand schedule and supply schedule for a market for a particular good. Suppose sellers of the good successfully lobby Congress to impose a price floor $3 above the equilibrium price in this market.
Price | Quantity Demanded | Quantity Supplied |
$0 | 15 | 0 |
$1 | 13 | 3 |
$2 | 11 | 6 |
$3 | 9 | 9 |
$4 | 7 | 12 |
$5 | 5 | 15 |
$6 | 3 | 18 |
Following the imposition of a price floor $3 above the equilibrium price, irate buyers convince Congress to repeal the price floor and to impose a price ceiling $1 below the former price floor. The resulting market price is