Example of a model: 3 The supply demand for new cars explains the factors that determine the price of cars and the quantity sold. assumes the market is competitive:each buyer and seller is too small to affect the market price ■Variables: d=quantity of cars that buyers demand Os quantity that producers supply P=price of new cars Y=aggregate income P,price of steel (an input) CHAPTER 1 The Science of Macroeconomics slide 15 CHAPTER 1 The Science of Macroeconomics slide 15 Example of a model: The supply & demand for new cars ▪ explains the factors that determine the price of cars and the quantity sold. ▪ assumes the market is competitive: each buyer and seller is too small to affect the market price ▪ Variables: Q d = quantity of cars that buyers demand Q s = quantity that producers supply P = price of new cars Y = aggregate income Ps = price of steel (an input) 3