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{{Economics_Lectures}}

{{Economics_Lectures}}

As a student astutely suggested last class, economics studies the '''''transfer''''' of goods and services.  The first obvious question is this: what determines the '''''price''''' and '''''quantity''''' of goods transferred?  In other words, how much must a buyer pay for the good (the price), and how many units of the good (the quantity) will the seller be able to sell at that price?

As a student astutely suggested last class, economics is the study of the '''''transfer''''' of goods and services.  The first obvious question is this: what determines the '''''price''''' and '''''quantity''''' of goods transferred?  In other words, how much must a buyer pay for the good (the price), and how many units of the good (the quantity) will the seller be able to sell at that price?

Let's take an example.  Suppose you own a candy store, and you sell chocolate candy bars.  What price should you use for those candy bars?  If you sell them for $1 each, many people will buy them.  But if you charge $5 per candy bar, fewer will buy them at that price.  Your quantity of goods sold will be much less.  If, on the other hand, you sell the candy bars for only 10 cents per bar, you'll sell out quickly as people rush to buy the bars at that low price (perhaps to resell the bars at a higher price and make a profit themselves).  It might seem like you'd be happy at selling so many, but you make much less money overall at 10 cents per bar than at $1 per bar.  So you're worse off if you set the price at only 10 cents per bar, because you receive too little for each bar, and you're worse off if you set the price at $5 per bar, because you sell too few bars.  The best price for you to use for the candy bars is around $1 per bar.

Let's take an example.  Suppose you own a candy store, and you sell chocolate candy bars.  What price should you use for those candy bars?  If you sell them for $1 each, many people will buy them.  But if you charge $5 per candy bar, fewer will buy them at that price.  Your quantity of goods sold will be much less.  If, on the other hand, you sell the candy bars for only 10 cents per bar, you'll sell out quickly as people rush to buy the bars at that low price (perhaps to resell the bars at a higher price and make a profit themselves).  It might seem like you'd be happy at selling so many, but you make much less money overall at 10 cents per bar than at $1 per bar.  So you're worse off if you set the price at only 10 cents per bar, because you receive too little for each bar, and you're worse off if you set the price at $5 per bar, because you sell too few bars.  The best price for you to use for the candy bars is around $1 per bar.