The market system refers to the method of allocating scarce resources through
the market forces of demand and supply. Markets consist of buyers (who have
demand for a particular good or service) and sellers (suppliers of a particular good
or service). Also known as the price mechanism, the market system establishes
market equilibrium where demand equals supply. At this
position, the market is cleared of any shortages or surpluses.
The demand curve shows that consumers will tend to buy more
as the price falls. The supply curve ) shows that fi rms will tend to
offer more for sale as the price rises. When the opposing market forces of demand
and supply are in balance, an equilibrium price and quantity are established,
where all products offered for sale at that price are bought by consumers.
shows that firms will tend to
offer more for sale as the price rises. When the opposing market forces of demand
and supply are in balance, an equilibrium price and quantity are established,
where all products offered for sale at that price are bought by consumers.
Market disequilibrium occurs when the market price is either above or below
the equilibrium price. If the price of a product is above the equilibrium price, the
product is deemed to be too expensive for consumers, so the quantity supplied
will exceed the quantity demanded. To sell off this excess supply, the price must
be reduced.
this post is not completed . will completed today at 6:30
