Market system is an interrelated set of markets
A market is defined as the interaction of all potential buyers and sellers
of a good
of goods that are close substitutes
- The markets provide information to agents that may be used to identify and evaluate alternative choices that might be used to achieve objectives.
- Each agent acting in a market has incentives to react to the information provided.
- Given the information and incentives, agents within markets can adjust to changes .
of market adjustment can be visualized as changes in demand
- Markets include all potential buyers and sellers
include all “potential buyers and sellers”
- behavior of buyers is represented by “ demand ” (benefits side of model)
- behavior of sellers is represented by “supply” ( cost side of model)
Definition: “A schedule
of the quantities of a good that buyers are willing and able
to purchase at each possible price during
of time, other
things held constant
- Demand can also be perceived as a schedule of the maximum prices buyers are willing and able to pay for each unit of a good.
The market demand function
is the horizontal summation of the
individuals' demand functions
In models of firm
behavior, the demand for a firm's product can be