Competitive Markets: Demand and Supply

Competitive Markets:
Demand and Supply

Unit 2: Microeconomics

Word Cloud

Real-life examples of markets?

Word Cloud

Essential element(s) of any market?

Markets

... refer to any kind of arrangement where buyers (consumers) and sellers (producers) of goods, services, or resources are linked together to carry out an exchange.

Categorize

Options (8)

Labor market

Market for copper ore

Market for timber

Market for aircrafts

Market for consulting services

Market for bread

Fish market

Market for healthcare services

Categorize markets by the commodity of exchange.

Resource (factor) market

Product market

Competition

A process by which rivals compete to achieve some objectives.

Competition between producers of a product?
Competition between consumers of a product?
Competition between factor owners (e.g. labors)?

Competitive Market

• A homogeneous good

• Perfect information

• Many buyers and sellers in the market

  • Each individual buyer/seller's action has no impact on the market outcome (esp. price)

  • Price-taking behavior

• No barriers to entry/exit

• Perfect resource mobility

Open Ended

Real-life examples of competitive markets?

Demand

Individual Demand

... refers to the various quantities of a good (or service) that an individual buyer is willing and able to buy at different possible prices during a particular time period, ceteris paribus.

Willingness vs. Ability

Fill in the Blanks

Feiran's demand for ice-creams reveals the relationship between the price of ice-creams and the

of ice-creams demanded by him.

Fill in the Blanks

In Feiran's demand for ice-creams, the independent variable is

of the ice-creams.

Fill in the Blanks

In Feiran's demand for ice-creams, the dependent variable is

of the ice-creams.

Ceteris Paribus

• "All other things being equal"

  • Assumption of the model

  • What is the thing?

  • What are other things?

  • Why assume other things equal?

Consider the scenario

You went to Aspretto cafe and decided to buy some sweet snacks for the weekend. You had [your birthdate DD*2+10] RMB to spend. You are choosing between chocolate cookies (¥15 per box), chocolate wafers (¥5 per bar), and gummy bears. For some reason, price of gummy bears was intelligible and could range anywhere from ¥5 to ¥15 per pack.

Construct your individual demand for gummy bears, with a possible price range ¥5 - ¥15, by specifying your quantities demanded at those prices.

​

Individual Demand

Individual Demand Schedule

​Price	Quantity demanded​
​5	​
6​	​
7​	​
8​	​
9​	​
10​	​
11​	​
12​	​
13​	​
14​	​
15​	​

Law of Demand

https://www.youtube.com/watch?v=LwLh6ax0zTE&ab_channel=JacobClifford

Market Demand

Think of a market consists of only your group as consumers. Construct the market demand for gummy bears, which by definition is:
"... indicates the various quantities all the consumers in the market are willing and able to buy at different possible prices during a particular time period, ceteris paribus."

Market Demand Schedule

​Price	Quantity demanded​ by consumer 1	Quantity demanded​ by consumer 2	...	Quantity demanded​ by the market
​5	​	​	​	​
6​	​	​	​	​
7​	​	​	​	​
8​	​	​	​	​
9​	​	​	​	​
10​	​	​	​	​
11​	​	​	​	​
12​	​	​	​	​
13​	​	​	​	​
14​	​	​	​	​
15​	​	​	​	​

Fill in the Blanks

Compare your individual demand (when there is only 1 consumer - you) and the market demand (where there are multiple consumers), the demand curve ___(verb)___ ___(adverb for direction)___.

Supply

Individual Supply

Based on what you know about the definition of individual demand, and the fact that individual supply represents a producer (seller), give a definition for individual supply.

Definition

Individual supply refers to the various quantities of a good (or a service) that an individual seller is willing and able to produce and sell in the market at different possible prices over a particular time period, ceteris paribus.