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Table of Contents

  1. Topic pack - Microeconomics - introduction
  2. 1.1 Competitive Markets: Demand and Supply
  3. 1.1 Competitive Markets: Demand and Supply - notes
    1. The nature of markets
    2. Types of markets
    3. Market structure
    4. Spectrum of competition
    5. Demand
    6. The law of demand
    7. Individual and market demand
    8. Non-price determinants of demand
    9. Movements along the demand curve
    10. Shifts in the demand curve
    11. Example - shifts and movements along a demand curve
    12. Exceptions to the normal law of demand
    13. Linear demand functions
    14. Linear demand functions - example
    15. The law of supply
    16. Non-price determinants of supply
    17. Movements along the supply curve
    18. Shifts in the supply curve
    19. Shifts and moves of supply curve
    20. The real supply curve?
    21. Linear supply functions
    22. Linear supply functions - example
    23. Market equilibrium
    24. Market equilibrium - notes
    25. Excess demand and excess supply
    26. Example 1 - the market for DVD players
    27. Example 2 - the market for fish
    28. Applications of demand and supply
    29. Calculating market equilibrium
    30. Calculating equilibrium - example
    31. Scarcity and choice
    32. Choice and opportunity cost
    33. Price signalling
    34. Market efficiency - consumer surplus
    35. Market efficiency - producer surplus
    36. Allocative efficiency
  4. 1.1 Competitive markets - questions
  5. 1.1 Competitive markets - simulations and activities
  6. 1.2 Elasticities
  7. 1.2 Elasticities - notes
  8. Section 1.2 Elasticities - questions
  9. Section 1.2 Elasticities - simulations and activities
  10. 1.3 Government intervention
  11. 1.3 Government Intervention - notes
  12. 1.3 Government intervention - questions
  13. 1.3 Government intervention - simulations and activities
  14. 1.4 Market failure
  15. 1.4 Market failure - notes
  16. Section 1.4 Market failure - questions
  17. Section 1.4 Market failure - simulations and activities
  18. 1.5 Theory of the firm
  19. 1.5 Theory of the firm - notes (HL only)
  20. Section 1.5 Theory of the firm - questions
  21. Section 1.5 Theory of the firm - simulations and activities
  22. Print View

1.1 Competitive Markets: Demand and Supply - notes

Introduction

S:\triplea_resources\DP_topic_packs\economics\student_topic_packs\media_microeconomics\images\market.jpgResources are allocated in competitive (free) markets through the workings of the price mechanism. Price changes give signals to suppliers who are able to respond to the demands of consumers. If the price of vegetables rises, for instance, more farmers will want to grow and sell (supply) vegetables. Also, if more people want to buy vegetables (demand) in an area, say as a result of increased population, prices will rise.

Two key terms have been mentioned, supply and demand. Write down now, before you go any further, what you think these terms mean. Put your descriptions to one side. We will return to them later.

The free market price mechanism, operating under certain specific conditions (more of this later) is also the base against which the workings of real markets and economies are measured by economists.

In this section we consider the following topics in detail:

  • Markets and market structure (this is covered in detail by HL students in section 1.5)
  • Market structure
  • The importance of price as a signal
  • Demand
  • Supply
  • Interaction of demand and supply
  • Price controls


This unit examines the concepts of demand and supply in detail, then goes on to examine the operation of a competitive market. It is an extremely important unit, not only in its own right, but also because it links in with other units, such as units 3 (International Economics) and 4 (Development Economics).