Market forces of supply and demand (textbook) Flashcards
what do the terms supply and demand refer to?
the behaviour of people as they interact with one another in competitive markets
what is a market?
a group of buyers and sellers of a particular good or service
what do buyers determine?
buyers determine the demand for a product
what do sellers determine?
sellers determine the supply of the product
what is a competitive market?
a market in which there are many buyers and many sellers so that each has a negligible impact on the market place
What are price and quantity determined by?
all buyers and sellers as they interact in the market place
Why do sellers have limited control over the price of goods?
because other sellers are offering similar products
Why can buyers not influence the price of goods?
because each buyer purchases only a small amount
If markets reach the highest form of competition, what do you assume they are?
perfectly competitive
For markets to be perfectly competitive, which 2 characteristics must they have?
1) the goods offered for sale are all exactly the same
2) the buyers and sellers are so numerous that no single buyer has any influence over the market price
In a perfectly competitive market, what are buyers and sellers known as?
‘price takers’ because they must accept the price the market determines
Give an example of a market where the assumption of perfect competition applies perfectly
the wheat market
there are thousands of farmers who sell wheat and millions of consumers who use wheat and wheat products
bc no single buyer or seller can influence the price of wheat, each take the price as given
