sloping reflecting the willingness of producers to sell more of the commodity

Sloping reflecting the willingness of producers to

This preview shows page 3 - 5 out of 5 pages.

sloping, reflecting the willingness of producers to sell more of the commodity they produce in a market with higher prices. Any change in non-price factors would cause a shift in the supply curve, whereas changes in the price of the commodity can be traced along a fixed supply curve. decrease in supply Illustration of an increase in equilibrium price ( p ) and a decrease in equilibrium quantity ( q ) due to a shift in supply ( S ). Encyclopædia Britannica, Inc. Market Equilibrium
Image of page 3
It is the function of a market to equate demand and supply through the price mechanism. If buyers wish to purchase more of a good than is available at the prevailing price, they will tend to bid the price up. If they wish to purchase less than is available at the prevailing price, suppliers will bid prices down. Thus, there is a tendency to move toward the equilibrium price. That tendency is known as the market mechanism, and the resulting balance between supply and demand is called a market equilibrium. Get exclusive access to content from our 1768 First Edition with your subscription. Subscribe today Adam Smith, F.A. Hayek, and free-market economics Learn about free-market economics, as advocated in the 18th century by Adam Smith (with his “invisible hand” metaphor) and in the 20th century by F.A. Hayek. © Open University ( A Britannica Publishing Partner ) See all videos for this article
Image of page 4
Image of page 5

You've reached the end of your free preview.

Want to read all 5 pages?

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture