EC4101 week 3 lecture 1

What characterizes a monopoly in a market?

In a competitive market, how does a change in demand differ from a change in quantity demanded?

Which of the following describes the behavior of the demand curve?

How does an increase in the price of a substitute good affect the demand for a product?

In an oligopoly market structure, which of the following is typically true?

Which of the following best describes the supply and demand model?

What happens when buyers' income increases with respect to normal goods?

Which element is NOT a key component of the supply and demand model?

Competitive Markets

A competitive market has many buyers and sellers of the same good/service.
Buyers and sellers believe their actions don't affect market price.

Perfect Competition

Products are identical (homogeneous).
Numerous buyers and sellers, none with influence over prices.

Monopoly

One producer controls the price of a good/service.
Many sellers with slightly differentiated products; each sets its own price.

Oligopoly

Few sellers.
Firms rely on non-price competition.
Potential for collusion among sellers.

Supply and Demand Model

Five key elements:
- Demand Curve (buyers)
- Supply Curve (sellers)
- Shifts in demand and supply curves
- Market equilibrium
- Changes in market equilibrium

Demand

Quantity buyers are willing/able to purchase at each price.
Demand curve shows this behavior.

Demand Curve Shifts

Change in demand (not quantity demanded) shifts the curve.
Factors affecting demand:
- Price of related goods
  - Substitutes: If one good price falls, customers buy less of the other.
  - Complements: If one good price falls, customers buy more of the other good.
- Income of buyers
  - Normal goods: Demand increases with income.
  - Inferior goods: Demand decreases with income.
- Tastes
- Expectations about future prices
- Number of customers

Excess Demand

Quantity demanded exceeds quantity supplied at the ruling price.

This quiz covers various market structures including competitive markets, perfect competition, monopoly, and oligopoly. It explores the supply and demand model, key elements like demand curves, and how shifts in demand affect market equilibrium. Test your understanding of these fundamental economic concepts.