Eco (3 - Markets & Prices)

Students should be able to:

1. explain the term “market”;
2. identify the market forces;
3. describe the relationship between price and demand, and price and supply;
4. explain the concept of ceteris paribus;
5. illustrate the concepts of demand and supply by using demand and supply curves;
6. explain the determinants of demand and supply;
7. illustrate how changes to the determinants affect demand and supply curves;
8. explain the concept of market equilibrium;
9. illustrate market equilibrium diagrammatically;
10. explain changes in the market equilibrium;
11. illustrate changes in the market equilibrium;
12. explain the concept of price elasticity of demand;
13. outline factors affecting price elasticity of demand;
14. illustrate price elasticity of demand, using simple calculations;
15. illustrate other types of elasticities of demand, using simple calculations;
16. explain price elasticity of supply;
17. illustrate price elasticity of supply, using simple calculations;
18. define the term ‘market structure’;
19. outline the characteristics of market structures;
20. identify the main types of market structures;
21. define the term “market failure”;
22. outline the main causes of market failure;
23. state the main consequences of market failure.

CONTENT
1. Concept of a market.
2. Definitions of supply and demand.
3. The relationship between price and quantity demanded, and price and quantity supplied (the four
laws of demand and supply).
4. The concept of ceteris paribus.
5. Diagrammatic representation of demand curve and supply curve.
6. Demand and supply conditions: factors determining the environment for price movements.
7. Diagrammatic representations and analyses of how changes to the determinants affect demand and
supply curves.
8. Market equilibrium: agreement between consumer and supplier on the price and quantity of goods
demanded and offered.
9. Diagrammatic representation of market equilibrium.
10. The impact of changes in market conditions on market equilibrium.
11. Illustration of the market equilibrium.
12. Price elasticity of demand:
(a) concept of price elasticity of demand and its determinants;
(b) concept of income and cross elasticity of demand.
13. Factors affecting price elasticity of demand.
14. Illustration, by graphs and tables, of changes in conditions of demand and supply
15. Illustration, by graphs, of elastic and inelastic demand.
16. Price elasticity of supply: what happens to quantity supplied following a change in price.
17. Illustration, by graphs and tables, of elastic and inelastic supply.
18. Definition of market structure.
19. Market structure: behavior and performance of firms in a variety of situations:
(a) number of buyers and sellers;
(b) types of goods;
(c) freedom of entry and exit;
(d) control on price.
20. Main types of market structures:
(a) perfect competition;
(b) monopoly;
(c) oligopoly;
(d) monopolistic competition.
21. Definition of market failure.
22. Causes of market failure:
(a) monopoly;
(b) merit goods and public goods;
(c) negative or positive externalities.
23. Consequences of market failure:
(a) retrenchment;
(b) unemployment;
(c) economic depression;
(d) rise in levels of poverty;
(e) decline in provisions for societal welfare