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ECON 1000 Chapter Notes - Chapter 4: Demand Curve, Perfect Competition, Negative Relationship

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pinkjackal290
6 Sep 2018
School
Carleton University
Department
Economics
Course
ECON 1000
Professor
Vivek Dehejia

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Document Summary

Economics chapter four: the market forces of supply and demand. Example: each seller posts a price for the ice cream come, and each buyer decides how much ice cream to buy at each store. What is competition: the price and quantity of ice cream is not determined by any single buyer or seller, rather, price and quantity are determined by all buyers and sellers as they interact in the market place. At the market price buyers can buy all they want and sellers can sell all they want. The demand curve: the relationship between price and quantity demanded. Assumption that the determinant of demand is the price and not something else. Quantity demanded: the amount of a good that buyers are willing and able to purchase. Law of demand: the claim that, other things equal, the quantity demanded of a good falls when the price of the good rises, when the price falls, the quantity demanded rises.

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Related Questions

The demand for ice cream is given by Q D = 20 - 2P, measured in gallons of ice cream. The supply of ice cream is given by Q S = 4P - 10. Suppose that the government legislates a $1 tax on a gallon of ice cream, to be collected from the seller.

a) As a result of the tax, what is the price paid by buyers?

b) What is the price received by sellers?

Hint: You need to determine the consumer and producer burden of the tax. First, find the equilibrium price and quantity. Then, determine the elasticity of demand and supply. Then, use the share of the tax formula provided to you to determine the burdens. After, that you add the consumer burden to the equilibrium price to find the buyer price. Subtract the producer burden from equilibrium price to find seller price.

For a market to be competitive:
 
A) each buyer and seller is small, relative to the world market; no single decision-maker has any influence over the market price.
B) sellers must produce goods and services that are different from their competitors.
C) sellers should have substantial pricing power.
D) all you need are many buyers and many sellers
E) the price must be a fair price

A competitive market is one in which:

a. is only one seller, but many buyers. 

b. are many sellers, and each has the ability to set the price of his product. 

c. are many sellers and compete with one another in such a way that some sellers are always being forced out of the market. 

d. are so many buyers and so many sellers that each has a negligible impact on the price of the product.