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Explore the concept of market equilibrium where buyers and sellers agree on prices, creating a balance between consumer demand and producer supply. Learn with examples like flea markets and watermelon sales. Discover how prices are determined through negotiation and observe the effects of shortages and surpluses in markets. Understand the concept of equilibrium price and how surpluses and shortages are temporary phenomena in the marketplace. Don't miss the insights from the farmers' market dynamics!
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CHAPTER 6 MARKETS, EQUILIBRIUM AND PRICES
SUPPLY MEETS DEMAND Flea market example Point where buyers and sellers agree-equilibrium Quantity that consumers are willing to buy equals quantity producers are willing to produce
Market Equilibrium Like a balanced scale Watermelon example Equilibrium price
Prices and Balance In competition prices are negotiated Farmers market is great place to see this in action “Trial and error” messages
The Price is “Wrong” Disequilibrium Two outcomes: shortage or surplus Price is too low-shortage Excess demand
The Price is “Wrong” Price is to High- Surplus Excess supply Both are a sort of guessing game Surpluses and shortages are usually temporary
