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Competitive Markets: Demand and Supply

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Competitive Market

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  • Any kind of arrangement where buyers and sellers of goods / services / resources are linked together to carry out exchange

 

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Market

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  • Market that consists of large numbers of sellers and buyers acting independently, so there is no one who can control the price. Instead, the price of a good is determined by the force of demand and supply

List of Goods

截圖 2020-09-04 上午5.11.22.png

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  • Behaviour of Buyers

  • Total quantity of goods or services that a consumer is willing and able to consume at different possible price levels, ceteris paribus

Demand

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截圖 2020-09-04 上午5.24.09.png
截圖 2020-09-04 上午5.24.09.png

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Market Demand

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  • negative causal relationship between price and quantity

 

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  • the extra advantage that a consumer could get when consuming one more extra unit of good or service

  • Diminishing marginal utility - MB falls as quantity consumed increases, consumer will only buy another extra one when the price falls

 

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Law of demand

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Marginal Benefit

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  • Sum of all individual demand

截圖 2020-09-04 上午5.31.20.png

Non-price determinants of demand

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  • Variable other than price that can influence demand

  • Change in determinants will cause shifts in the demand curve

截圖 2020-09-04 上午5.35.56.png

List of non-price determinants of demand

截圖 2020-09-04 上午5.37.45.png

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  • changes in quantity demanded

Movements along demand curve

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截圖 2020-09-04 上午5.41.03.png

Supply

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  • Behaviour of Sellers

  • Total quantity of goods and services that a firm is willing and able to supply to the market for sale at different possible price levels, ceteris paribus

截圖 2020-09-04 上午5.46.09.png
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  • Positive causal relationship between price and quantity. The reason behind is that higher price for firms means more profit

Law of supply

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  • The sum of the individual supply

Market supply

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Special Supplies

截圖 2020-09-04 上午5.51.47.png

Vertical Supply Curve

截圖 2020-09-04 上午5.55.00.png

Vertical supply curve indicates a fix amount quantity of good or service

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Non-price determinants of supply

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  • Variable other than price that can influence supply

  • Change in determinants will cause shifts in the supply curve

截圖 2020-09-04 上午5.58.15.png
截圖 2020-09-04 上午5.58.15.png

Lists of non-price determinants of supply

截圖 2020-09-04 上午6.03.42.png

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  • changes in quantity supplied

Movements along supply curve

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截圖 2020-09-04 上午6.08.24.png

Market Equilibrium

  • The situation when market supply is equal to market demand, which two forces are balanced without the tendency for the price change.

截圖 2020-09-04 上午9.21.19.png
截圖 2020-09-04 上午9.21.26.png

Price Mechanism

  • System where the forces of supply and demand determine the price of the product

  • Price as signals (signal to decision maker) & Price as incentive (motivate the decision maker to make action)

Increase in Demand & Decrease in Demand

截圖 2020-09-04 上午9.27.34.png
截圖 2020-09-04 上午9.27.49.png

Increase in Supply & Decrease in Supply

截圖 2020-09-04 上午9.31.37.png
截圖 2020-09-04 上午9.31.42.png

Efficiency

截圖 2020-09-04 上午9.31.50.png

*Competitive market realises both allocative efficiency and productive efficiency

截圖 2020-09-04 上午9.31.57.png

*The diagrams / definitions in this website is extracted / Notes are summarized from "Economics for the IB Diploma, 2nd Edition" authored by Ellie Tragakes.

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This site is created in 2020, owned by Rex Hsu 徐唯耀. 

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