Microeconomics an der Hochschule Rhein-Waal

A market is any place where buyers and sellers meet to exchange goods and services.

A price signal is the information that markets generate to guide the distribution of resources.

The desire or willingness of the people with required ability to purchase goods and services at a particular price.

In a perfectly competitive market, no participant (buyer or seller) is large enough to have the power to set (or influence) the price of a homogeneous product, e.g. farmer's market.

• a decrease in supply creates excess demand at the originl equilibrium price
• the excess demand pushes price upward until a new higher price and lower quantitiy are reached

• Monotonicity: More is preffered to less, "non-satiation"
• Convexity: Averages are better than extremes
• well-behaved indifference curves are downward sloping
• well-behaved indifference curves are bowed inward

A list showing the quantity of a good that consumers would choose to purchase at different prices, with all other variables held constant.

A change in the price of a good: 

• causes a movement along the demand curve or change in quantity demanded
• a fall in price would cause a movement to the right along the demand curve
• a rise in price would cause a movement to the left along the demand curve

An imperfectly competitive market is a market where a single buyer or seller has the power to set (or influence) the price, e.g. local electricity company

The equilibrium price is the price at which the quantity of a product offered is equal to the quantity of the product in demand.

Elasticity refers to the degree of responsiveness of one variable to another.

• allows us to analyze supply and demand with greater precision
• we know that when price increases, quantity demanded decreases, ceteris paribus (Law of Demand)
• Price elasticity of demand explains the relationship between price and quantity

A curve showing the relationship between the price of a good and the quantity demanded, holding constant all other variables that influence demand. 

It is the graphical representation of the demand schedule. 

The Law of demand tells us that demand curves virtually always slope downward.