Notes on markets and supply and demand

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Markets in Actions

Economic Problem- unlimited wants limited resources.

Opportunity cost- benefit forgone of the next best alternative.

Factors of production:
Land: natural resources ex: coal, oil, water
Labor: Human work force
Capital: Physical manmade resource used in the production process
Entrepreneurship: a person who brings together all other factors.

PPF
Production possibility frontier- A PPF shows all combinations of two goods that an economy can produce within a given amount of resources.
1) only 2 goods are produced
2) all resources are fully and efficiently employed.
3)Resources can be switched by production one good to another.

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Markets
A market is a place where buyers and sellers meet to exchange goods and services.
Choosing a price:
1)        Quality of the product
2)        Cost of production
3)        Competitors price
4)        What consumers are prepared to pay.

Consumer Surplus
it is the difference between the price a consumer is prepared to pay and the price they actually pay.

Supply

Supply is a quantity of goods and services that a supplier is willing to supply at a given price over a period of time.

Factors affecting supply:
1)        If the price changes it will be a movement along the curve
2)        Costs of productions- increase ...

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