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The Market Forces of Supply and Demand

The Market Forces of Supply and Demand. Chapter 4. Competitive Market. Lots of informed buyers and sellers dealing in identical goods. Figure 1 Catherine’s Demand Schedule and Demand Curve. Figure 2 Market Demand as the Sum of Individual Demands. Figure 3 Shifts in the Demand Curve.

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The Market Forces of Supply and Demand

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  1. The Market Forces of Supply and Demand Chapter 4

  2. Competitive Market Lots of informed buyers and sellers dealing in identical goods.

  3. Figure 1 Catherine’s Demand Schedule and Demand Curve

  4. Figure 2 Market Demand as the Sum of Individual Demands

  5. Figure 3 Shifts in the Demand Curve

  6. Shift Factors for Demand • Income. • Prices of related goods (substitutes and complements). • Tastes. • Expectations. • Number of buyers.

  7. Figure 4 Shifts in the Demand Curve versus Movements along the Demand Curve

  8. Figure 6 Market Supply as the Sum of Individual Supplies

  9. Figure 6 Market Supply as the Sum of Individual Supplies

  10. Figure 7 Shifts in the Supply Curve

  11. Shift Factors for Supply • Input prices. • Technology. • Expectations. • Number of sellers.

  12. Figure 8 The Equilibrium of Supply and Demand

  13. Figure 9 Markets Not in Equilibrium

  14. A Three-Step Program for Analyzing Changes in Equilibrium • Decide whether the event shifts the supply or demand curve (or perhaps both). • Decide in which direction the curve shifts. • Use the supply-and-demand to see how the shift changes the equilibrium price and quantity.

  15. Figure 10 How an Increase in Demand Affects the Equilibrium

  16. Figure 11 How a Decrease in Supply Affects the Equilibrium

  17. Figure 12 A Shift in Both Supply and Demand

  18. In-class Exercise With a separate supply and demand diagrams, show the effect on equilibrium price and quantity in the blueberry market of the following events. Provide a brief explanation for every curve shift. • Scientific research conclusively proves that blueberries reverse age related memory loss. • A new form of irrigation improves the productivity of blueberry farms. • Starbucks mounts a successful advertising campaign for its blueberry smoothies. • Incomes in the United States increase. • A blueberry bush disease spreads throughout the Northeast.

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