economics

Why do people engage in trade?

People engage in trade because both sides benefit and get something they value more.

If one trading partner gains, must the others involved in the transaction lose an equal amount?

No, one person does not have to lose because voluntary trade benefits both sides.

What is a middleman?

A middleman is a person or business that helps buyers and sellers connect.

Example of a middleman not mentioned in the text.

An example is Amazon.

Do middlemen perform valuable services? Why or why not?

Yes, middlemen perform valuable services because they reduce transaction costs by saving time and effort.

How will a consumer decide whether to purchase a good?

Consumers decide to purchase a good when they value it more than the price.

What does purchasing a good reveal about the consumer?

Purchasing the good reveals the consumer values the product more than the money spent.

How does an entrepreneur decide whether to supply a good?

Entrepreneurs supply goods if consumers will pay enough to cover production costs and allow profit.

Will entrepreneurs continue to supply a good or service if consumers are unwilling to pay a price sufficient to cover the per-unit cost?

No, businesses usually stop supplying the product if consumers will not pay enough to cover the per-unit cost.

Why are businesses more likely to produce goods consumers value highly relative to price?

Businesses are more likely to produce goods consumers highly value because consumers will pay prices that allow profit.

Why are businesses less likely to undertake government-sponsored projects that have high production costs?

Businesses are less likely to produce goods when production costs are higher than what consumers are willing to pay.