Changes

{{Economics_Lectures}}

{{Economics_Lectures}}

Recall that a "free market" is one where there is no interference with the price and quantity of goods sold.  In a free market, government does not regulate the price or limit the quantity.  

Recall that a "free market" is one where there is no interference by government with the price and quantity of goods sold.  In a free market, government does not regulate the price or limit the quantity.  

In a free market, supply equals demand for both the price and quantity sold.  That is one of the beauties of free enterprise.  It is efficient, it is productive and it minimizes waste.  The supply and demand react almost immediately to changing needs and circumstances.  Millions of transactions, or sales, occur to bring the price to its point of price equilibrium.  The free market reacts much more quickly than government can.  For example, government offices typically close at 4:30 or 5pm, and most government offices (other than the Post Office) are closed on Saturday, but the free market is working 24 hours a day, 6 or 7 days a week.  You may be asleep, but the free market is at work to bring price to its most efficient level.

In a free market, supply equals demand for both the price and quantity sold.  That is one of the beauties of free enterprise.  It is efficient, it is productive and it minimizes waste.  The supply and demand react almost immediately to changing needs and circumstances.  Millions of transactions, or sales, occur to bring the price to its point of price equilibrium.  The free market reacts much more quickly than government can.  For example, government offices typically close at 4:30 or 5pm, and most government offices (other than the Post Office) are closed on Saturday, but the free market is working 24 hours a day, 6 or 7 days a week.  You may be asleep, but the free market is at work to bring prices to their most efficient levels.

Prices change daily due to continual changes in supply and demand.  During your next few trips to the supermarket, notice how much the prices fluctuate.  This is because both supply and demand are constantly changing.  Supply changes due to variations in the amount of unsold goods, problems or improvements in manufacturing, farming or shipping, or different yields in crops due to weather and other factors.  Labor costs change over time, which also affects supply.  Demand is constantly fluctuating also.  Every day people lose or switch jobs, which affects their buying decisions.  The changing of the seasons also affects demand, as do variations in personal tastes.

Prices change daily due to continual changes in supply and demand.  During your next few trips to the supermarket, notice how much the prices fluctuate.  This is because both supply and demand are constantly changing.  Supply changes due to variations in the amount of unsold goods, problems or improvements in manufacturing, farming or shipping, or different yields in crops due to weather and other factors.  Labor costs change over time, which also affects supply.  Demand is constantly fluctuating also.  Every day people lose or switch jobs, which affects their buying decisions.  The changing of the seasons also affects demand, as do variations in personal tastes.

Two decades ago there was tremendous demand for Beanie Babies, driving up the price.  Now there is far less demand, so the price has fallen.  The same could be said about any fad.

Two decades ago there was tremendous demand for Beanie Babies, driving up the price.  Now there is far less demand, so the price has fallen.  Over time, there are fluctuations in price for virtually every good and service.

This week we build on several principles introduced last week, and also introduce some entirely new concepts.

This week we build on several principles introduced last week, and also introduce some entirely new concepts.