MarketKanako Nakagawa

Market

Market: where buyers (consumers) and sellers (producers) come together to establish an equilibrium price and quantity for a good or service. Does not need to be an actual place.

Demand

Demand: the willingness and ability to purchase a quantity of a good or service at a certain price over a given time period. Law of Demand: states that as the price of a good or

service rises, the quantity demanded decreases. Demand curve: a graphical representation of the law of

demand. Depicts the inverse relationship between price and quantity demanded.

Demand Curve

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Supply

Supply: the willingness and ability of a producer to produce a quantity of a good or service at a certain price over a given period of time. Law of supply: states that as the price of a good rises, the

quantity supplied increases. Supply curve: Is a graphical representation of the law of

supply. Illustrates the direct relationship between price and quantity supplied.

Supply Curve

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Equilibrium Price

Equilibrium Price: the market clearing price. Occurs where demand = supply

Equilibrium Price

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Equilibrium Price

Maximum Price

Maximum price (price ceiling): price set by the government, above which the market price is not allowed to rise. Usually set to protect consumers from high prices, perhaps for essential goods. Examples can be house rentals.

Price Ceiling

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Price CeilingShortage

Minimum Price

Minimum Price (price floor): Price set by the government, below which the market price is not allowed to fall. Usually set to protect producers producing essential products from facing prices that are too low. Examples are wages.

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Price Floor

Surplus