Market Equilibrium 4


Basic Characteristics of a Market

  • When a supplier's cost=consumer's benefit, a sale occurs.
  • The price mechanism exchanges information between the two parties: what it cost the producer and what utility it has.
  • A product is in high demand when lots of costomers want to buy it.
  • A product is in high supply if lots of suppliers want to sell it at a given price.

Price allows a market to clear by Rationing, Signalling and Incentivising.

Equlibrium between buyers and sellers determines a market price.

In competitive markets, there is a lot of price fluctuation to acheive…


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