COMMERCE 1B03 Chapter Notes - Chapter 2: Gross Domestic Product, Economic Equilibrium, Equilibrium Point
21 Apr 2013
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Summary: capitalism is an economic system in which all or most of the means of production and distribution (e. g, land, factories, railroads, and stores) are privately owned and operated for profit. The free market is one in which decisions about what to produce and in what quantities are made by the market- that is, by buyers and sellers negotiating prices for goods and services. Buyers" decision in the marketplace tell sellers what to produce and in what quantity. When buyers demand more goods, the price goes up, signaling suppliers to produce more. The higher the price, the more goods and services suppliers are willing to produce. Price, that, is the mechanism that follow free markets to work. The key factor in determining the quantity supplied and the quantity demanded id price. The equilibrium point, also referred to as the equilibrium price, is the point whre the qunaity demanded is the same as the quantity supplied.
