The following will be discussed in this chapter: Demand and supply in a market economy, degree of competition, degree of competition, surpluses and shortages, private enterprise in a market economy,. | Introduction to Business LECTURE 2: Introduction to Business MGT 100 1 Demand and Supply in a Market Economy 2 Demand and Supply Schedule The relationships among different levels of demand and supply at different price levels as obtained from marketing research, historical data, and other studies of the market. Demand curve: How much product will be demanded (bought) at different prices. Supply curve: How much product will be supplied (offered for sale) at different prices. Market price (equilibrium price): The price at which the quantity of goods demanded and the quantity of goods supplied are equal. 3 4 Surpluses and Shortages 5 Surplus A situation in which the quantity supplied exceeds the quantity demanded Causes losses Shortage A situation in which the quantity demanded will be greater than the quantity supplied Causes lost profits Invites increased competition Private enterprise in a Market Economy 6 Private Enterprise System Allows individuals to pursue their own interests with minimal government restriction. Elements of a Private Enterprise System Private property rights Freedom of choice Profits Competition Degree of Competition 7 Perfect Competition Prices are determined by supply and demand because no single firm is powerful enough to influence the price of its product. All firms in an industry are small. The number of firms in the industry is large. Principles of perfect competition: Buyers view all products as identical. Buyers and sellers know the prices that others are paying and receiving in the marketplace. It is easy for firms to enter or leave the market. Prices are set exclusively by supply and demand and accepted by both sellers and buyers. Degree of Competition (cont) 8 Monopolistic Competition There are numerous sellers trying to differentiate their products from those of competitors so as to have some control over price. There are many sellers, though fewer than in pure competition. Sellers can enter or leave the market easily. The large . | Introduction to Business LECTURE 2: Introduction to Business MGT 100 1 Demand and Supply in a Market Economy 2 Demand and Supply Schedule The relationships among different levels of demand and supply at different price levels as obtained from marketing research, historical data, and other studies of the market. Demand curve: How much product will be demanded (bought) at different prices. Supply curve: How much product will be supplied (offered for sale) at different prices. Market price (equilibrium price): The price at which the quantity of goods demanded and the quantity of goods supplied are equal. 3 4 Surpluses and Shortages 5 Surplus A situation in which the quantity supplied exceeds the quantity demanded Causes losses Shortage A situation in which the quantity demanded will be greater than the quantity supplied Causes lost profits Invites increased competition Private enterprise in a Market Economy 6 Private Enterprise System Allows individuals to pursue their own interests with
