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Macroeconomics 111 - Chapter 3

Macroeconomics 111 - Chapter 3 - 1-25 CHAPTER 3 Markets...

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1-25 – CHAPTER 3: Markets, Demand and Supply, and the Price System Markets: A market is a place or service that enables buyers and sellers to exchange good and services Barter: The exchange of goods and services directly without the involvement of money Monetary Exchanges: Involve exchanging money for goods and services Bartering – requires a “double coincidence of wants.” Each party must want what the other has to trade. -Transaction costs – cost of making an exchange -Money reduces transaction costs Relative Price : The price of one good in terms of the other is called the relative price. The rate of exchange between the two goods Demand: The amount of a product that people are willing and able to purchase at each possible price during a given period of time, everything else kept constant -Relationship between price and quantity Quantity Demanded : The amount of a product that people are willing and able to purchase at one specific price -It is quantity Law of Demand :
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