Chapter 4 Supply and Demand
Fall 2017
1
Questions
? If you are making real estate investment decisions, how would you predict the effect of the policy changes?
? What are the real factor driving the residential housing price in China?
? What are the long-run perspectives of Chinese real estate markets?
2
The Market Mechanism
? A Market is a mechanism through which buyers and sellers interact to determine prices and exchange goods, services, and assets
– Geographical area; – Time period; – Good/service being traded
work – Refer to the behavior of people as they
interact with one another in competitive markets
4
Markets and Competition
? Market
– A group of buyers and sellers of a particular good or service
? 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
demanded rises
? As they interact in the marketplace
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Markets and Competition
? Perfectly competitive market
– Goods offered for sale are all exactly the same
– Buyers and sellers are so numerous
? 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)
? The “indivisible hand”
– No single individual or organization or government is responsible for solving the economic problems in a market economy
– Our society, despite of its fragility (surprise!), functions well for most of the time in a spontaneous manner
– 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
quantity demanded of the good falls – When the price falls, the quantity
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Markets and Competition
? Monopoly
– The only seller in the markபைடு நூலகம்t – Sets the price
? Other markets
– Between perfect competition and monopoly
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Demand
? Quantity demanded
– Highly organized
? Markets for many agricultural commodities
– Less organized
? Market for ice cream in a particular town
6
Markets and Competition
? Competitive market
– Buyers as a group
? Determine the demand for the product
– Sellers as a group
? Determine the supply of the product
5
Markets and Competition
? Markets take many forms
– Price; market equilibrium; efficiency 3
Markets and Competition
? Supply and demand
– Words economists use most often – The forces that make market economies
– 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