MARKET 1 Lecture Notes - Lecture 17: Shortage, Energy Market, Carpool
Document Summary
The demand curve plots the relationship between the market price and the quantity of a good demanded by buyers. The supply curve plots the relationship between the market price and the quantity of a good supplied by sellers. The competitive equilibrium price equates the quantity demanded and the quantity supplied. When prices are not free to fluctuate, markets fail to equate quantity demanded and quantity supplied. A market: is a group of economic agents who are trading a good or service, and the rules and arrangements for trading. Agricultural and industrial goods like wheat, soybeans, iron, and coal are all traded on markets. A market can have a specific location. Ex) the market for gasoline is dispersed located on every corner you find a gas station. Prices act as a selection device that encourages trade between the sellers who can produce goods at low cost and the buyers who place a high value on the goods.