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Questions and Answers
What characterizes a monopoly in a market?
What characterizes a monopoly in a market?
- One producer controls price (correct)
- Numerous buyers and sellers with no pricing power
- Complete absence of competition
- Many sellers with identical products
In a competitive market, how does a change in demand differ from a change in quantity demanded?
In a competitive market, how does a change in demand differ from a change in quantity demanded?
- Change in demand causes a movement along the demand curve
- Change in demand involves shifts regardless of price (correct)
- Change in quantity demanded is unaffected by price
- Change in quantity demanded shifts the demand curve
Which of the following describes the behavior of the demand curve?
Which of the following describes the behavior of the demand curve?
- It remains static regardless of market fluctuations
- It reflects the total supply in the market
- It shifts left with an increase in quantity demanded
- It shows buyer behavior at various prices (correct)
How does an increase in the price of a substitute good affect the demand for a product?
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?
In an oligopoly market structure, which of the following is typically true?
Which of the following best describes the supply and demand model?
Which of the following best describes the supply and demand model?
What happens when buyers' income increases with respect to normal goods?
What happens when buyers' income increases with respect to normal goods?
Which element is NOT a key component of the supply and demand model?
Which element is NOT a key component of the supply and demand model?
Flashcards
Competitive Market
Competitive Market
A market with many buyers and sellers of the same good/service, where neither buyers nor sellers affect the market price.
Perfect Competition
Perfect Competition
A market where products/services are identical, and numerous buyers and sellers have no influence over prices.
Monopoly
Monopoly
One producer controlling the price of a good/service.
Demand Curve
Demand Curve
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Demand
Demand
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Substitute Goods
Substitute Goods
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Complement Goods
Complement Goods
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Change in Demand
Change in Demand
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Study Notes
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
- Price of related goods
Excess Demand
- Quantity demanded exceeds quantity supplied at the ruling price.
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Description
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.
