In a free, unregulated market system, market forces establish equilibrium prices and exchange quantities. While equilibrium conditions may be efficient, it may be true that not everyone is satisfied
The Law of Supply: uFirms are willing to produce and sell a greater quantity of a good when the price of the good is high. uThis results in a supply curve that slopes upward
“The best things in life are free. . . ” Free goods provide a special challenge for economic analysis Most goods in our economy are allocated in markets… …for these goods, prices are the signals that guide the decisions of buyers and sellers
The Market Forces of Supply and Demand Supply and demand are the two words that economists use most often. Supply and demand are the forces that make market economies work. Modern microeconomics is about supply, demand, and market equilibrium
it must also allocate the output of goods and services that they produce. It must decide who will eat caviar and who will eat potatoes. It must decide who will drive a Porsche and who will take the bus. The management of society’s resources is important because resources are scarce. Scarcity means that society has limited