Tag: Markets and Prices

Market Systems

Market Systems Market systems are those in which decisions relating to resource allocation, production, consumption and price levels are left up to individuals and organizations, who act in their own best interest. There are however two variables which influence the rational choice(s) for both consumers and firms. They are supply and demand.   Read more...

Demand and Supply

Demand and Supply Demand refers to how much quantity of a good or service is desired by consumers. Supply is the amount of a good or service producers are willing to offer at a particular price. There are several determinants which influence the quantity demanded and supplied of goods and services. However, our focus is…...

Demand Curve

Demand Curve The law of demand states that, the higher the price of a good or service, the less of these products consumers are willing to purchase, ceteris paribus. As the price of these goods and services fall, the more of these products consumers are willing to purchase, ceteris paribus. Figure 3.1 Above is a…...

Supply Curve

Supply Curve The law of supply states that, as the price of a commodity rises, so does the quantity supplied, ceteris paribus. As the price falls, the quantity supplied also falls, ceteris paribus. Figure 3.2 Above is a supply curve; it shows the relationship between price and quantity supplied, ceteris paribus. The supply curve is…...

Shifts in the Demand Curve

Shifts in the Demand Curve There are factors which can cause a shift in the demand curve. These factors are non-price determinants and include: – Disposable income – Consumer preferences – Changes in population size – Changes in the price of substitutes or complements. Changes in these factors will result in a shift of the…...

Shifts in the Supply Curve

Shifts in the Supply Curve The factors which impact quantity supplied are the price of inputs, improvements in technology, the number of suppliers and prices of related goods. A fall in the price of inputs, increase in the level of technology, increase in the number of suppliers, rise in the price of a complementary good…...

Market Equilibrium

Market Equilibrium A market is said to be in equilibrium where the supply and demand curves intersect. At this point, for a given price, the quantity supplied is equal to the quantity demanded and the market is most efficient. Figure 3.7 Figure 3.7 above shows a market in Equilibrium. Shifts in the demand and supply…...

Elasticity

Elasticity Price Elasticity of demand serves to determine just how responsive quantity demanded is to changes in price. It is defined as the percentage change in quantity demanded divided by the percentage change in price, that is, If customer demand is very responsive to a change in price, the response is said to be elastic.…...