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ECN 3100 PRINCIPLES OF ECONOMICS

ECN 3100 PRINCIPLES OF ECONOMICS. Demand & Supply Market Equilibrium Shortage & Surplus. DEMAND & SUPPLY. market : a group of buyers and sellers of a particular good or service.

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ECN 3100 PRINCIPLES OF ECONOMICS

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  1. ECN 3100 PRINCIPLES OF ECONOMICS • Demand & Supply • Market Equilibrium • Shortage & Surplus Chapter 4

  2. DEMAND & SUPPLY market: a group of buyers and sellers of a particular good or service. competitive market: a market in which there are many buyers and many sellers so that each has a negligible impact on the market price. Characteristics of a perfectly competitive market: a. The goods being offered for sale are all the same. b. The buyers and sellers are so numerous that none can influence the market price. Because buyers and sellers must accept the market price as given, they are often called "price takers.“ Other types of market: a. A market with only one seller is called a monopoly market. b. A market with only a few sellers is called an oligopoly. c. A market with a large number of sellers, each selling a product that is slightly different from its competitors’ products, is called monopolistic competition. Chapter 4

  3. DEMAND & SUPPLY Chapter 4

  4. DEMAND & SUPPLY P P Q Q Chapter 4

  5. MARKET EQUILIBRIUM P Q Chapter 4

  6. MARKET EQUILIBRIUM Assume that the demand equation is Qd = 100 – 10P and the supply equation is Qs = 20 + 10P. Find the market equilibrium. P Q Chapter 4

  7. MARKET EQUILIBRIUM Price Ceiling (binding) = When the market price is set below the equilibrium price, there will be a shortage in supply. Price Floor (binding) = When the market price is set above the equilibrium price, there will be a surplus in supply. P S 2.00 D 7 Q Chapter 4

  8. QUESTION Assume that the demand equation is Qd = 200 – 5P and the supply equation is Qs = 100 + 5P. Find the market equilibrium. Explain what happens to the demand and supply if the market price is set at RM15. P Q Chapter 4

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