A consumer's desire and willingness to pay a price for a specific good or service.
In a market economy, what two forces primarily determine the price of a good or service?
Supply and Demand.
What is 'supply'?
The total amount of a specific good or service that is available to consumers.
What is the Law of Demand?
Generally, if the price of a good increases, the quantity demanded will decrease. Conversely, if the price decreases, the quantity demanded will increase.
What is the Law of Supply?
Generally, if the price of a good increases, producers will be willing to supply more of it. Conversely, if the price decreases, they will supply less.
What happens to the price of a product if demand is very high but the supply is very low?
The price will typically increase significantly. This is often seen with popular new electronics or limited-edition items.
What happens to the price of a product if the supply is very high but the demand is very low?
The price will typically decrease. This happens when a store has too much inventory of an unpopular item and puts it on clearance.
What is 'market equilibrium price'?
The price at which the quantity of a good supplied is equal to the quantity demanded. On a graph, it's where the supply and demand curves intersect.
What is 'competition' in an economic sense?
The rivalry between businesses selling similar products or services. They compete for customers by offering lower prices, better quality, or more choices.
How does competition generally benefit consumers?
It often leads to lower prices, higher quality goods, a wider variety of choices, and better customer service as businesses compete for customers' money.
What is a 'monopoly'?
A situation where a single company or group owns all or nearly all of the market for a product or service, leading to a lack of competition. This can result in higher prices and fewer choices for consumers.
