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Supply and Demand The Heart & Soul of Market Economics.

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Presentation on theme: "Supply and Demand The Heart & Soul of Market Economics."— Presentation transcript:

1 Supply and Demand The Heart & Soul of Market Economics

2 Adam Smith (1723-90) Free markets best promote the social welfare Markets are naturally “self regulating” Markets: Allocate scarce resources Price: Determines “For Whom” Supply & Demand: Determines “What is produced” Buyers = Demand Sellers = Supply Wheat Trading Game

3 Demand The quantity of goods or services that consumers are willing and able to purchase at various prices Law of Demand Inverse Relationship Price Decrease Qty Demanded increases

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