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Line 116: − # When demand exceeds supply at a given price, the price tends to rise. Likewise, when supply exceeds demand, the price tends to decrease. + − # A rise in price tends to increase supply and decrease demand. Conversely a fall in price tends to decrease supply and increase demand. − # Price tends to move towards the amount at which the quantity in demand is equal to the quantity in supply: SUPPLY EQUALS DEMAND. − Note the use of the verb “tend” in the laws of economics cited above. Companies that consistently lose money “tend” to go bankrupt and out of business. But it does not happen immediately, especially if the company is large. It takes time for the market to come to equilibrium. Ultimately supply does equal demand, but only after enough time and activity passes for the conditions to attain equilibrium.+ + + + + + +
Economics Lecture Two (view source)
Revision as of 11:53, September 5, 2009
, 11:53, September 5, 2009→Three basic principles of economics: done
==Three basic principles of economics==
==Three basic principles of economics==
We can now state the three most basic principles of economics with respect to price:
# A rise in price tends to increase supply and decrease demand. Conversely a fall in price tends to decrease supply and increase demand. '''LOWER PRICE MEANS HIGHER DEMAND'''
# When demand exceeds supply at a given price, the price tends to rise. Likewise, when supply exceeds demand, the price tends to decrease.
# Price tends to move towards the amount at which the quantity in demand is equal to the quantity in supply: '''EQUILIBRIUM IS WHERE SUPPLY EQUALS DEMAND'''.
Many of the problems in this course, and in any economics course, can be answered just by remembering and applying the above there principles about price.
== Imbalance in Information ==
== Imbalance in Information ==