In economics, Markets can be defined broadly or narrowly, depending on our purpose.

The process of combining distinct things into a single whole.

Markets in which firms sell goods and services to households.

Markets in which households that own resources sell them to firms.

A simple model that shows how goods, resources, and dollar payments flow between households and firms.

When we think of competition in markets, economists classify them as either an “imperfectly competitive market” or as a “perfectly competitive market”.

In a perfectly competitive market, individual buyers and sellers CANNOT influence the price of the product.

In an imperfectly competitive market, individual buyers and sellers can influence the price of the product.

Lets look at cars and computers!

The supply and demand model is designed to explain how prices are determined in “perfectly competitive markets”.

The amount of a good that all buyers in a market would choose to buy during a period of time, given the constraints they face.

As the price of a good increases, the quantity demanded decreases.

Latin for “all else remaining the same.”

A list showing the quantities of a good that consumers would choose to purchase at different prices, with all other variables held constant.

A graphical depiction showing the quantity of a good or service demanded at various prices, with all other variables held constant.

A movement along a demand curve in response to a change in price.

A shift of a demand curve in response to a change in some variable other than price.

The amount that a person or firm earns over a particular period of time.

A good that people demand more of as their income rises.

A good that people demand less of as their income rises.

The total value of everything a person of firm owns (assets), at a point in time, minus the total value of everything owed (liabilities).

A good that can be used in place of some other good and that fulfills more or less the same purpose.

Read and be prepared to discuss vocabulary for SUPPLY in pages 65 through 80.