Demand and Supply
Discuss the Anatomy of the Market Equilibrium Position.
A market is a social institution where consumers and suppliers freely exchange goods and services for money and has a structure which structure can be characterized according to how many suppliers are seeking the demand of consumers or vice versa. Markets exist in all types of goods and services, and economists are generally interested in how they work and what causes them to change. In most markets today, the competing desires of consumers and suppliers help to establish equilibrium in the market. This equilibrium is attained as a result of how markets behave over time, and the interaction and influences of supply and demand which determine the market price and the quantity sold in the market. The market price is called the equilibrium price - the price of a good or service at where quantity supplied is equal to quantity demanded - also called the market-clearing price.
Economics is the social science concerned with the allocation of scarce resource to satisfy unlimited wants and needs of people. It explores the principles of supply and demand and how prices are determined. Since human and property resources are scarce or limited, it follows that the goods and services we produce must also be limited. An economic condition that exists when demand is greater than supply is known as scarcity. This scarcity limits our options and forces us to make choices – because we “can’t have it all”, we must decide what we will have, and what we must forego. In order to satisfy these unlimited wants economists have looked at microeconomics which is the analyst of various sectors of the economy and how the behaviour of households and firms relate to the allocation of limited resources when there is a price change.
The production possibility boundary (the PPB, also called the production possibilities curve (PPC) or the “transformation curve”) is a graph that...