lecture3.pdf - The price mechanism demand an supply What is...

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The price mechanism: demand an supply
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What is a market: Potential buyers(consumers) and potential sellers(suppliers) of a good or service dealing together for the purpose of exchange. Suppliers are referred to in economics as firms Consumers are referred as households
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Price theory and the market Price theory is concerned with how market prices for goods are arrived at through the interaction of demand and supply. A good or service has a price if it is useful as well as scarce
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Concept of Demand Demand refers to the quantity of a good that potential purchases would buy, or attempt to buy at a given price
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Demand schedule
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Demand curve
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Law of demand An inverse relationship exists between the price of a good and the quantity demanded in a given time period, ceteris paribus . ceteris paribus holding everything else constant
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Market demand curve Market demand is the horizontal summation of individual consumer demand curves
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Determinants of demand tastes and preferences Price of the good
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