Chapter 3 - Chapter 3 Supply and Demand 1. G roups of...

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1 Chapter 3 Supply and Demand 1. Groups of Market Participants o Consumers o Business firms o Governments o Foreigners 2. Goals of Market Participants o Consumers — maximize happiness or satisfaction from goods and services. o Businesses/Foreigners and Traders — maximize profits. o Government — maximizes general welfare of society. o Foreigners—pursue same goals as consumers, producers, and government agencies. 3. Constraints on Market Participants o Limited Resources o Consumers need to make choices from available products. o Producers must choose how to best use their limited resources. 4. Locating Markets o A market is anywhere an economic exchange occurs. o A market exists wherever and whenever an exchange takes place. o Barter o Dollar and Exchange 5. Specialization and Exchange o We are incapable of producing all that we desire. o We have limited amount of time, energy, and resources. o Do what you are best at and rely on others to fill in the gaps. 6. Market Interaction: Two Markets o Factor Market o Any place where factors of production are bought and sold. o Product Market o Any place where finished goods and services (products) are bought and sold.
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7. Ceteris Paribus o The assumption of nothing else changing. o Focus on one or two forces at a time and assume nothing else changes. 8. Supply and Demand o Two Sides of a market o Supply o The ability and willingness to sell (produce) specific quantities of a good at alternative prices in a given time period, ceteris paribus . o Demand o The ability and willingness to buy specific quantities of a good at alternative prices in a given time period, ceteris paribus . 9.
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Chapter 3 - Chapter 3 Supply and Demand 1. G roups of...

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