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Chapter 3: Q. 14 (page 78)

Will demand curves have the same exact shape in all markets? If not, how will they differ?

Short Answer

Expert verified

Generally, the demand curve slopes downward. But in some markets the shape of demand curve is different. In perfectly competitive market, the number of buyers and sellers is so large that each one is so small to influence the price and quantity level in the market.

Step by step solution

01

Definition

Law of Demand: Keeping other factors constant, there is an inverse relation between price and quantity demanded of a product.

02

Explanation

Generally, the demand curve slopes downward. But in some markets the shape of demand curve is different. In perfectly competitive market, the number of buyers and sellers is so large that each one is so small to influence the price and quantity level in the market.

The product is homogenous in nature. In this case, the market demand curve is horizontal in shape, parallel to x-axis.

While in an imperfectly competitive markets like monopoly or monopolistic competition, the market demand curve is downward sloping. The monopoly is a market in which there is a single seller selling unique product. Whereas, monopolistic competition is a market structure in which there are large sellers and buyers but not as large as in perfect competition, dealing in differentiated products.

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Most popular questions from this chapter

What is the difference between the supply and the quantity supplied of a product, say milk? Explain in words and show the difference on a graph with the supply curve for milk.

Agricultural price supports result in governments

holding large inventories of agricultural products. Why

do you think the government cannot simply give the

products away to poor people?

Table 3.10 shows the supply and demand for movie tickets in a city. Graph demand and supply and identify the equilibrium. Then calculate in a table and graph the effect of the following two changes.

a. Three new nightclubs are open. They offer decent bands and have no cover charge, but make their money by selling food and drink. As a result, demand for movie tickets falls by six units at every price.

b. The city eliminates a tax that is placed on all local entertainment businesses. The result is that the quantity supplied of movies at any given price increases by 10%.

Does a price ceiling change the equilibrium price?

Table 3.9 illustrates the market's demand and supply for cheddar cheese. Graph the data and find the equilibrium. Next, create a table showing the change in quantity demanded or quantity supplied, and a graph of the new equilibrium, in each of the following situations:

(a) The price of milk, a key input for cheese production, rises, so that the supply decreases by 80 pounds at every price.

(b) A new study says that eating cheese is good for your health, so that demand increases by 20% at every price.

Price per poundQdQs
\(3.00750540
\)3.20700600
\(3.40650650
\)3.60620700
\(3.80600720
\)4.00590730
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