The Market
- Cecilie 🇩🇰
- 29. aug. 2016
- 2 min læsning
Terms
⭐️ Market: Where buyer and seller meet to exchange goods and services
⭐️ Market mechanism: A mechanism that ensures that the price is influenced by changes in demand and supply.
⭐️ Revenue: What a, eg shop, earns by selling a good.
⭐️ Sales: Price x amount
Laws
🔒 Signalling: The price is too high → consumers do not buy → the price is lowered → consumers buyLikewise,The price is too low → consumers buy → the price can be increased, if necessary.
🔒 The law of declining demand: The higher the price the lower the demand
The Market
A market it where seller and buyer meet and exchange goods and services
The actors influence the price formation
Consumers demand
Companies supply
We see the market as a signalling system
The buyers react according to the price and quality
Signalling:
The price is too high → consumers do not buy → the price is lowered → consumers buy
Likewise,
The price is too low → consumers buy → the price can be increased, if necessary.
In this case the market mechanism works.
The market mechanism is a mechanism that ensures that the price is influenced by changes in demand and supply.
The law of declining demand:
The higher the price the lower the demand:
Price ↓ → demand ↑
Price ↑ → demand ↓
If the price on goods in a welfare society is $0:
The direct price = $0
→
The demand is higher than it would have been had there been user charges.
User charges in the public sector → limited demand → less expenses.
Consumers are utility maximising, ie they choose what maximises the utility because their resources (money) are scarce. This mechanism controls the behaviour of households.
Sales: Price x amount
Revenue: What a, eg shop, earns by selling a good.