Chapter 3

Chapter 3 - Chapter Three: Supply and Demand Market...

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Chapter Three: Supply and Demand Market Participants o The goal is to maximize the utility we get from our available incomes. o Businesses try to maximize profits. o The basic goals of utility maximization, profit maximization, and welfare maximization explain most market activity. o Economic interactions with each other are necessitated by two constraints: Our absolute inability to produce all the things we need or desire. The limited amount of time, energy, and resources we have for producing those things we could make for ourselves. The Circular Flow o Factor Markets – any place where factors of production are bought and sold. o Product Markets – any place where finished goods and services are bought and o The consumer is the final recipient of all goods and services produced. Locating Markets o The term market refers to a place or situation where an economic exchange occurs—where a buyer and a seller interact o Every market transaction involves an exchange of dollars for goods or resources o Supply – the ability and willingness to sell specific quantities of a good at alternative prices in a given time period, ceteris paribus. o
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Chapter 3 - Chapter Three: Supply and Demand Market...

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