Economics Preliminary Topic 3 – Markets

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Preliminary Topic Three – Markets
The role of the market
 Market: is where consumers and sellers voluntarily meet to exchange
goods/service and money.
 The exchange between consumers and sellers is where we act to solve the
economic problem.
 The role of the market is to provide a place where available resources can be
exchanged in order to meet the needs and wants of consumers
 There are two types of markets
– product or good and service market: food, clothes, hairdressing, nails
– factor market: includes labour, capital (money), entrepreneurial skill, natural
 relative price is important in reflecting opportunity costs in the goods and
services and factor markets
Demand and supply
Demand
 Demand: the quantity of a particular good or service that consumers are willing
and able to purchase at various price levels at a given point in time.
 In a product market demand comes from consumers
Law of demand, individual and market demand, the demand curve
 Two types of demand:
– Market (total) demand: the demand by all consumers for a particular good or
service.
– Individual demand: is the demand of each individual consumer for a
particular good or service.
 Law of demand: the quantity demanded by consumers falls as prices rise which
means as quantity rises prices fall.
 exception to law of demand is needs and necessities because as their
prices rise demand doesn’t signifcantll decrease
 The demand curve