Economists use the model of supply and demand to analyze competitive markets. In a competitive market, there are many buyer» and sellers, each of whom has little or no influence on the market price.
The demand curve shows how the quantity of a good demanded depends on the price. According to the law of demand, as the price of a good falls, the quantity demanded rises. Therefore, the demand curve slopes downward,
In additkm to price, other determinants of how-much consumers want to buy include income, tin; prices of substitutes and complements, tastes, expectations, and the number of buyers- If one of these factors changes, the demand curve shifts.
• The supply curve shows how Ihe quantity of a good supplied depends on tlx- price. According to the law of supply, as the price of a good rises, the quantity supplied rises. Therefore, the supply curve slopes upward.
• In addition lo price, other determinants of how much producers want to sell include input prices, technology, expectations, and the number of sellers. If one of these factors changes, the supply curve shifts.
• The intersection of the supply and demand curves determines the market equilibrium. At the equilibrium price, the quantity demanded equals the quantity supplied,
• The behavior of buyers and sellers naturally drives markets toward their equilibrium. When the market price is above the equilibrium price, there is a surplus of the good, which causes the market price to fall. When the market price is
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