Chapter 4 Overview

Ah, supply and demand. The first two words the average person thinks of when they think about economics. I learned about the difference between less organised markets (standard ones we see in our everyday lives) and more organised markets (agricultural commodities, stock market). The idea of a competitive market also makes sense, because unless you're Andrew Carnegie, it's really hard to monopolise a marketplace on a large scale. When it comes to quantity demanded of a good, the most important factor is price. But other factors can be crucial when looking at shifts in the demand curve, like buyer's incomes, prices of related goods, tastes, expectations, and the number of buyers. One thing that's very important to remember is that to determine if you need to shift or move along the curve, all you need to do is examine both the vertical and horizontal axis, and if the variable being changed isn't on either axis, it results in a shift in the demand curve. I enjoyed the "real world application" of these theories with the hypothetical smoker problem, because it helped me to think about various ways policy makers might go about achieving the same goal. The laws of supply and demand are also interesting, because price and demand have an inverse correlation, while price and supply have a direct correlation. While price is the most factor when it comes to determining supply, other factors must be considered. When looking at shifts in the supply curve, we must look at changes in input prices, technology, expectations about the market, and the number of sellers. Overall, supply and demand was an interesting topic. I would rate it 2/3 in terms of difficulty.