2. What is a Market? An institution or mechanism that brings together buyers and sellers Common element in all markets: goods are traded We can show how markets work with diagrams
3. Demand Law of Demand: All else equal, as the price decreases, the quantity demanded rises Demand is how much individuals are able and willing to purchase at any price, during a period of time Downsloping demand curve (inverse relationship) Changes in price: movements along the curve P D Quantity of gasoline
4. Determinants of Demand Things other than price that affect why people buy gasoline Change in buyer tastes (what they want) Change in the number of buyers Change in income Change in prices of related goods Change in expectations Shifts the curve [The curve only deals with price and consumption.]
6. Supply Law of Supply: All else equal, as price rises, the quantity supplied rises Changes in price: movements along the curve P S Q
7. Determinants of Supply Things other than price affect why firms sell gasoline Change in resource prices Change in technology Change in taxes or subsidies Change in prices of other goods related in production Change in expectations Changes in number of sellers Shifts the curve