The Market Forces of Supply and Demand

Market

A group of buyers and sellers of a particular good or service.

Competition

A rivalry where two or more parties strive for a common goal

Competitive Market

A market in which there are many buyers and many sellers so that each has a negligible impact on the market price

Perfect Competition

The highest form of competition

Price Takers

Market participant that is not able to dictate the prices in a market

Monopoly

A market structure that consists of a single seller or producer and no close substitute

Quantity Demanded

Is a fundamental concept that describes the amount of a good or service consumers are willing and able to purchase at a specific price. Influence by many factors one of the key factors is price.

Law of Demand

Is the claim that, other things being equal, the quantity demanded of a good falls when the price of the good rises.

Normal Good

A good for which, other things being equal, an increase in income leads to an increase in demand

Inferior Good

A good for which, other things being equal, an increase in income leads to a decrease in demand

Substitutes

Two goods for which an increase in the price of one leads to an increase in the demand for the other

Complements

Two goods for which an increase in the price of one leads to a decrease in the demand for the other

Quantity Supplied

It is a key concept in economics and is typically influenced by factors like production costs, the price of the good, technology, and market competition.

Law of Supply

Other things being equal, the quantity supplied of a good rises when the price of the good rises.

Variables that can Shift the Supply Curve

Input price, technology, expectation, number of sellers

Input Price

These are the costs of the resources used to produce goods or services.

Technology

Advances in technology can make production more efficient, lowering costs and increasing supply.

Expectation

Anticipated changes in input costs or demand can prompt producers to adjust current production levels.

Number of Sellers

The more sellers there are in the market, the greater the overall supply of a good or service.

Equilibrium

It is a point where supply and demand balance each other out.

Equilibrium Price

Is the price at the point of intersection.

Equilibrium Quantity

It’s the point where the supply from producers matches the demand from consumers.

Prices

Guide the allocation of resources in a market economy, act as signals that determine who gets what and in what quantity.

Market Economies

Allocate scarce resources using supply and demand to set prices.

Price Gouging

Refer to the practice of increasing the prices of goods, services, or commodities to a level much higher than is considered reasonable or fair by some.