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The Market Forces of
Supply and Demand
Copyright © 2004 South-Western
• Supply and demand are the two words that
economists use most often
...
• Modern microeconomics is about supply,
demand, and market equilibrium
...
• The terms supply and demand refer to the
behavior of people
...
Copyright © 2004 South-Western
MARKETS AND COMPETITION
• Buyers determine demand
...
Copyright © 2004 South-Western
Competition: Perfect and Otherwise
• Perfect Competition
• Products are the same
• Numerous buyers and sellers so that each has no
influence over price
• Buyers and Sellers are price takers
• Monopoly
• One seller, and seller controls price
Copyright © 2004 South-Western
Competition: Perfect and Otherwise
• Oligopoly
• Few sellers
• Not always aggressive competition
• Monopolistic Competition
• Many sellers
• Slightly differentiated products
• Each seller may set price for its own product
Copyright © 2004 South-Western
DEMAND
• Quantity demanded is the amount of a good that
buyers are willing and able to purchase
...
Copyright © 2004 South-Western
The Demand Curve: The Relationship
between Price and Quantity Demanded
• Demand Schedule
• The demand schedule is a table that shows the
relationship between the price of the good and the
quantity demanded
...
Copyright © 2004 South-Western
Figure 1 Catherine’s Demand Schedule and Demand
Curve
Price of
Ice-Cream Cone
$3
...
50
1
...
2
...
50
1
...
50
0 1 2 3 4 5 6 7 8 9 10 11 12 Quantity of
Ice-Cream Cones
2
...
Copyright © 2004 South-Western
Market Demand versus Individual Demand
• Market demand refers to the sum of all
individual demands for a particular good or
service
...
Copyright © 2004 South-Western
Shifts in the Demand Curve
• Change in Quantity Demanded
• Movement along the demand curve
...
Copyright © 2004 South-Western
Changes in Quantity Demanded
Price of IceCream
Cones
B
$2
...
A
1
...
• Caused by any change that alters the quantity
demanded at every price
...
• As income increases the demand for an inferior
good will decrease