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Understanding Supply and Demand: The Basics of Market Economics

Supply and demand are foundational concepts in economics that describe the relationship between the availability of goods and services and the desire of consumers to purchase them. A market is a venue where buyers and sellers come together to exchange goods and services. Demand specifically refers to the quantity of a good or service that consumers are willing to buy at various price levels over a certain timeframe. The Law of Demand states that, all else being equal, as the price of a good increases, the quantity demanded decreases, illustrating the inverse relationship between price and quantity demanded.

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Understanding Supply and Demand: The Basics of Market Economics

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  1. Supply and Demand

  2. Market A place or service that allows buyers and sellers to exchange goods and services.
  3. Demand The quantity of a good or service that consumers are willing and able to buy at a given price during a specific period of time
  4. Law of Demand As the price of a good or service that producers are willing and able to offer at each possible price during a specific period of time.
  5. Supply The quantity of a good or service that producers are willing and able to offer at each possible price during a specific period of time.
  6. Law of supply As the price of a good increases, producers will offer more.
  7. Economic Good An economic good refers to goods and services.
  8. Economic Bad Any item for which we would pay to have less of
  9. Scarcity There is not enough of that item to satisfy everyone who ants it.
  10. Equilibrium The point at which the quantity demanded equals the quantity supplied at a particular price.
  11. Price Supply Equilibrium price Demand Quantity
  12. Surplus At prices above the equilibrium price the quantity supplied is greater than the quantity demanded.
  13. Price Supply Equilibrium price Equilibrium price Demand Quantity
  14. Shortage At the prices below the equilibrium price, the quantity demanded is greater than the quantity supplied
  15. Price Supply Equilibrium price Demand Quantity
  16. Price Supply Equilibrium price Equilibrium price Equilibrium price Demand Quantity
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