• A Market is a mechanism through which buyers and sellers interact to determine prices and exchange goods, services, and assets
– Geographical area;
– Time period;
– Buyers as a group
• Determine the demand for the product
– Sellers as a group
• Determine the supply of the product
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5
Markets and Competition
• Markets take many forms
work – Refer to the behavior of people as they
interact with one another in competitive markets
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4
Markets and Competition
• Market
– A group of buyers and sellers of a particular good or service
• Quantity demanded
– Amount of a good that buyers are willing and able to purchase
• Law of demand
– Other things equal – When the price of a good rises, the
– Market in which there are many buyers and many sellers
– Each has a negligible impact on market price
– Price and quantity are determined by all buyers and sellers
• No single buyer or seller has any influence over the market price
• Price takers
– At the market price
• Buyers can buy all they want
• Sellers can sell all they want
• As they interact in the marketplace
.
7
Markets and Competition
• Perfectly competitive market
– Goods offered for sale are all exactly the same
– Buyers and sellers are so numerous
• What are the real factor driving the residential housing price in China?
• What are the long-run perspectives of Chinese real estate markets?
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2
The Market Mechanism
Chapter 4 Supply and Demand
Fall 2017

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1
Questions
• If you are making real estate investment decisions, how would you predict the effect of the policy changes?
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8
Markets and Competition
• Monopoly
– The only seller in the market – Sets the price
• Other markets
– Between perfect competition and monopoly
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9
Demand
– Price; market equilibrium; efficiency
.
3
Markets and Competition
• Supply and demand
– Words economists use most often – The forces that make market economies
quantity demanded of the good falls – When the price falls, the quantity
– Good/service being traded
• The “indivisible hand”
– No single individual or organization or government is responsible for solving the economic problems in a market economy
– Highly organized
• Markets for many agricultural commodities
– Less organized
• Market for ice cream in a particular town
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6
Markets and Competition
• Competitive market
– Our society, despite of its fragility (surprise!), functions well for most of the time in a spontaneous manner
• To know how market help to solve the important questions and to be familiar with the following economic concepts, we need to study the demand and supply model (D-S model)