Chapter 4: The Market Forces of Supply and Demand

1. Supply and Demand: the behavior of people as they interact with one another in
competitive markets.
2. Market: A group of buyers and sellers of a particular good or service
3. Competitive market: A market in which there are many buyers and many sellers so that
each has a negligible impact in the market price
4. We assume that markets are perfectly competitive.
Why? All markets are assumed to be perfectly competitive in economics to simplify
analysis and comparison of market types. Although markets are not perfect in reality, this
assumption helps us understand how markets operate in an ideal situation and evaluate
the effectiveness of economic policies.
5. 2 characteristic of competitive market:
 The goods offered for sale are all exactly the same
 The buyers and sellers are so numerous that no single buyers or seller has any
influence over the market price.
 =>> they are said to be PRICE TAKERS
6. Some markets have only one seller=> monopoly
7. Quick quiz: 1c; 2b; 3a
DEMAND
8. Quantity Demand: The amount of a good that buyers are willing and able to purchase
9. Law of Demand: The claim that, other things being equal, the quantity demanded of a
good falls when the price of the good rises
10. Demand schedule: The table shows the relationship between the price of good and the
quantity demanded
11. Demand curve: The line relating price and quantity demanded; slopes down ward
(because lower price means a greater quantity demanded, other thinsg equal)
12. Market Demand: The sum of the Individual Demand
13. Shift in the Demand Curve:
 D curve shift to the right: Any changes that rises the quantity that buyers wish to
purchase at any given price
 D curve shift to the left: Any changes that lower the quantity that buyers wish to
purchase at any given price
14. Normal good: Demand of this good falls when income falls (others equal)
15. Inferior good: An increase in income leads to a decrease in demand (example bus: higher
income leads to taxi and cars users increases=> bus users decreases)
16. Substitutes: Two goods for which an increase in the price of one leads to an increase in
the demand for the other.
The point of chap 4: Mirror Image
The graph of market: D curve S curve
P.Qd=> willing/ability to purchase the goods
At each price level quantiy
Supply Curve: All combinition of price and quantity supply
Quantity of supply: The willingness and able to produce
Suggestion: For the Think-Pair-Share activities, if time allows, allow students to work in small
groups for 5-10 minutes. Then allow student groups to share with other groups or with the entire
class. Or, you can treat the Think-Pair-Share activity as an open-to-all in–class discussion.
Discussion points:
A. The typhoon destroying most of the apple crop will affect the market for apples and the
market for pineapple (and pineapple smoothies).
• In the market for apples, the supply of apples decreases, leading to higher prices
and lower quantity of apples.
• If apples and pineapples are substitutes, the higher price of apples will increase
the demand for pineapple and that will increase the price and quantity of
pineapples. If the roommate drinks home-made pineapple smoothies, he’ll pay a
higher price to make them. The higher price of pineapples will decrease the
supply of processed pineapple juice, so the market price of pineapple juice also
increases. No matter if the roommate makes or buys pineapple juice, he’ll pay a
higher price.
B. The markets for substitutes or complements of apples will be affected (substitutes for
apples: increase in demand, higher P and Q; complements for apples: decrease in
demand, lower P and Q). The markets for goods using apples as an ingredient (juices,
pasties, pies, apple sauce, jams and jellies, and so on) will see a decrease in supply due to
higher production costs, so higher P, lower Q.
Make an example: 5-8 pages-7 to 8 mins
Resources: ONLY NEWSPAPER only written in English
Question: At the end of chapter 4
4-6 sentences for the summary
4-6 Commentary
With knowledge of chapter 1 and 4: Comment
1st page of the newspaper and the link of the sources
Diagram or picture
Platform consumer, run a platform