Market-Based Economies Notes

Market-Based Economies

Definition of a Market: Any physical or virtual place where people exchange goods and services.
Market Economy: An economy where markets operate with minimal government interference, based on citizens' wants and needs.

Regulation: Exchanges between buyers and sellers are primarily regulated by supply and demand.
- Demand: The number of consumers willing to purchase an item at various prices.
  - Example: A new video game is released at 60. A certain number of consumers will be willing to pay that price.
- Law of Demand:
  - As the price of a good/service increases, the number of consumers willing to buy it decreases.
  - As the price decreases, the number of willing buyers increases.
  - Example:
    - If the video game price increases to 80, fewer customers will buy it.
    - If the price decreases to 40, more consumers will demand the game.
- Factors Influencing Demand (at all price points):
  - Increased/decreased popularity of substitute products.
    - Example: A rival video game lowers demand for the original.
  - Changes in consumers’ incomes.
    - Example: If consumers get raises, they may be more willing to purchase the video game at 40, 60, or 80.
  - Changes in consumers’ tastes.
- Supply: The number of goods a producer is willing and able to create and sell at various prices.

As the price of a good/service increases, the number of items producers are willing to sell increases.
Higher prices mean higher profits.
- The video game company will be willing to sell a certain number of video games for 40, even more for 60, and still more for 80.

Changes that make production easier or more difficult.
- Example: If the video game manufacturer develops a technology that speeds up production, it may be able to offer more games for sale for 40, 60, and 80.
- Example: If workers in the video game factory go on strike, the business will not be able to offer as many games for sale at any price point.