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Unformatted text preview: 1-25 CHAPTER 3: Markets, Demand and Supply, and the Price SystemMarkets:A market is a place or service that enables buyers and sellers to exchange good and servicesBarter:The exchange of goods and services directly without the involvement of moneyMonetary Exchanges:Involve exchanging money for goods and servicesBartering 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 goodsDemand: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 quantityQuantity Demanded: The amount of a product that people are willing and able to purchase at one specific price-It is quantityLaw of Demand: There is an inverse relationship between the price of a good and the quantity...
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- Spring '07