in economics, markets can be defined broadly or narrowly, depending on our purpose
TRANSCRIPT
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Supply and Demand
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Markets
In economics, Markets can be defined broadly or narrowly, depending on our purpose.
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Aggregation
The process of combining distinct things into a single whole.
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Product Markets
Markets in which firms sell goods and services to households.
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Resource Markets
Markets in which households that own resources sell them to firms.
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Circular Flow
A simple model that shows how goods, resources, and dollar payments flow between households and firms.
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*Circular Markets
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Competition in Markets
When we think of competition in markets, economists classify them as either an “imperfectly competitive market” or as a “perfectly competitive market”.
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Perfectly Competitive
In a perfectly competitive market, individual buyers and sellers CANNOT influence the price of the product.
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Imperfectly Competitive
In an imperfectly competitive market, individual buyers and sellers can influence the price of the product.
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Automobile MarketLaptop Market
Lets look at cars and computers!
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Laptop Market
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Classic Car Market
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Supply and Demand
The supply and demand model is designed to explain how prices are determined in “perfectly competitive markets”.
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Quantity Demanded
The amount of a good that all buyers in a market would choose to buy during a period of time, given the constraints they face.
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Law of Demand
As the price of a good increases, the quantity demanded decreases.
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Ceteris Paribus
Latin for “all else remaining the same.”
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Demand Schedule
A list showing the quantities of a good that consumers would choose to purchase at different prices, with all other variables held constant.
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Demand Schedule
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Demand Curve
A graphical depiction showing the quantity of a good or service demanded at various prices, with all other variables held constant.
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Demand Curve
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Change in Quantity Demanded
A movement along a demand curve in response to a change in price.
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Change in Demand
A shift of a demand curve in response to a change in some variable other than price.
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Change in Demand
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Income
The amount that a person or firm earns over a particular period of time.
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Normal Good
A good that people demand more of as their income rises.
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Inferior Good
A good that people demand less of as their income rises.
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Wealth
The total value of everything a person of firm owns (assets), at a point in time, minus the total value of everything owed (liabilities).
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Substitute
A good that can be used in place of some other good and that fulfills more or less the same purpose.
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Homework
Read and be prepared to discuss vocabulary for SUPPLY in pages 65 through 80.