Three questions: what to produce? (how much?, how to produce it? (which technology and resources?, whom is it being produced for? (how are outputs distributed?) Buyers and sellers in the market: buyers and sellers have different motivations, you cannot be both at the same time, they are two essential components to the market. Substitution effect: when prices go up, buyers will switch to substitutes. Income effect: purchasing power how much one is able to buy. Example: if you have , and a text book costs , then you are able to buy 10 text books. The supply curve: opportunity cost the value of the next best alternative. Excess supply: quantity demanded is less than quantity supplied. Product may be too available to buyers. A price drop may occur, which will in turn cause buyers to buy more. Excess demand: quantity demanded is greater than quantity supplied. The price may go up because of consumer desirability.