4: The market forces of supply and demand

Question 1

In the competitive market, what is market?

Answer 1

There are many buyers and sellers.

Question 2

In the competitive market, who have an impact on market prices?

Answer 2

Everyone!

Question 3

In the competitive market, who determind the P and Q?

Answer 3

By all sellers and buyers.

Question 4

In perfectly competitive market, how many buyers and sellers? Any of them can influence over the market price?

Answer 4

So numerous!

That’s why no single buyer or seller has any influence over the market price.

Question 5

Law of Demand?

Answer 5

P ↑ then Q ↓

P ↓ then Q ↑

Question 6

When does the demand curve shift?

Answer 6

When the Quantity changes.

Question 7

When does the demand/supply graph have movement?

Answer 7

When the Price changes.

Question 8

Which factors shift the demand curve? (5)

Answer 8

1. Income of consumers
2. Prices of related goods: substitute goods (Coca - Pepsi) or complements goods (cars - gasoline)
3. Taste: anything that causes a shift in tastes toward a good will increase demand for that good and shift its D curve to the right.
4. Expectation: cause from an increase in income/ price
5. Number of buyers

Question 9

Which factors shift the supply curve? (4)

Answer 9

1. Input price (materials, wages, etc.): making a cake needs flour and P flour increases -> P cake increases
2. Technology: A cost-saving tech. improvement has same effect as a fall in input price -> increase in S
3. Expectation about future
4. Number of sellers -> increase S -> shift to the right

Question 10

Law of supply and demand

Answer 10

The price of any good adjusts Qd and Qs balanced.