Market demand

Examples of Market demand in the following topics:

• Market Demand

  • A market demand schedule is a table that lists the quantity of a good all consumers in a market will buy at every different price.
  • A market demand schedule for a product indicates that there is an inverse relationship between price and quantity demanded.
  • The graphical representation of a market demand schedule is called the market demand curve.
  • As noted, both individual demand curves and market demand are typically expressed as downward shaping curves.
  • A market demand schedule is a table that lists the quantity of a good all consumers in a market will buy at every different price.

• The Demand Curve in Perfect Competition

  • In a perfectly competitive market the market demand curve is a downward sloping line, reflecting the fact that as the price of an ordinary good increases, the quantity demanded of that good decreases.
  • Price is determined by the intersection of market demand and market supply; individual firms do not have any influence on the market price in perfect competition.
  • Once the market price has been determined by market supply and demand forces, individual firms become price takers.
  • The demand curve for a firm in a perfectly competitive market varies significantly from that of the entire market.The market demand curve slopes downward, while the perfectly competitive firm's demand curve is a horizontal line equal to the equilibrium price of the entire market.
  • The market demand curve is downward-sloping.

• The Function and Nature of Markets

  • In a free market, the price and quantity of an item are determined by the supply and demand for that item.
  • In a free market, the price and quantity of an item is determined by the supply and demand for that item.
  • This can be expressed graphically by drawing the market supply function and the market demand function and finding the point where the two curves intersect .
  • Changes to the market supply and market demand will cause changes in the equilibrium price and quantity of the good produced.
  • The market equilibrium exists where the market demand curve and the market supply curve intersect.

• The Firm in Pure Competition

  • DM and SM represent the market demand and supply functions.
  • The demand faced by a single firm is perfectly elastic at the market price.
  • Since the market price has fallen, the demand, AR and MR functions faced by the firm will fall to D*, AR* and MR*.
  • (As shown in Panel B.VII.3. ) Note that a decrease in market supply will shift the firm's demand function up.
  • An increase (decrease) in market demand would shift the firm's demand up (down).

• Demand Curve

  • The demand curve in a monopolistic competitive market slopes downward, which has several important implications for firms in this market.
  • The demand curve of a monopolistic competitive market slopes downward.
  • While this appears to be relatively straightforward, the shape of the demand curve has several important implications for firms in a monopolistic competitive market.
  • Because the individual firm's demand curve is downward sloping, reflecting market power, the price these firms will charge will exceed their marginal costs.
  • Explain how the shape of the demand curve affects the firms that exist in a market with monopolistic competition

• Market Share

  • Market share is key metric that helps firms evaluate demand in their market and can be influenced by PR and marketing campaigns.
  • This metric, supplemented by changes in sales revenue, helps managers evaluate both primary and selective demand in their market.
  • Selective demand refers to demand for a specific brand while primary demand refers to demand for a product category.
  • Generally, sales growth resulting from primary demand (total market growth) is less costly and more profitable than that achieved by capturing share from competitors.
  • The price reduction is intended to increase demand from customers who are judged to be sensitive to changes in price.

• Chapter Questions

  • Draw a bond market with a supply and demand function.
  • Draw a bond market with a supply and demand function.
  • Draw a bond market with a supply and demand function.
  • How would the demand and supply functions for a bond market shift during a business cycle and during a recession?
  • How would the demand and supply functions shift in the bond market if investors, governments, and businessmen expect greater inflation?

• Clearing the Market at Equilibrium Price and Quantity

  • When a market achieves perfect equilibrium there is no excess supply or demand, which theoretically results in a market clearing.
  • At perfect equilibrium there is no excess demand (represented by 'A' in the figure) or excess supply (represented by 'B' in the figure), which theoretically results in a market clearing.
  • A market clearing, by definition, is the economic assumption that the quantity supplied will consistently align with the quantity demanded.
  • Combining these two assumptions, in a perfectly competitive market the amount of a product or service that is supplied at a given price will equate to the amount demanded, clearing the market of all goods/services at a given equilibrium point.
  • Markets demonstrate consistent shifts of supply and shifts of demand based on a wide spectrum of externalities.

• Role in Providing a Market for Loanable Funds

  • The loanable funds market is a conceptual market where savers (suppliers) and borrowers (demanders) are able to establish a market clearing.
  • In economics, the loanable funds market is a conceptual market where savers (suppliers) and borrowers (demanders) are able to establish a market clearing quantity and price (interest rate).
  • In the loanable funds market, market clearing is defined as the interest rate/loanable funds quantity where savings equal investment (the amount of capital needed for property, plant, and equipment based investments) .
  • Therefore, the demand and supply of capital is usually discussed in terms of the demand and supply of loanable funds.
  • When the supply and demand for loanable funds are equal, savings is equal to investment and the loanable funds market is in equilibrium at the prevailing interest rate.

• Demand Schedules and Demand Curves

  • A demand curve depicts the price and quantity combinations listed in a demand schedule.
  • The demand curve of an individual agent can be combined with that of other economic agents to depict a market or aggregate demand curve.
  • Using a demand schedule, the quantity demanded per each individual can be summed by price, resulting in an aggregate demand schedule that provides the total demanded specific to a given price level.
  • In this manner, the demand curve for all consumers together follows from the demand curve of every individual consumer.
  • The demand curve in combination with the supply curve provides the market clearing or equilibrium price and quantity relationship.