1.2.6 Price determination Flashcards
1
Q
What is a market?
A
Any place which brings buyers and sellers together.
They can be physical (e.g. Waterstones) or virtual (e.g. eBay)
2
Q
How is price determined in the market?
A
- Buyers agree the price by purchasing the good/service.
- If they do not agree on the price then they do not purchase the good/service.
This encourages sellers to adjust their prices until an equilibrium price is reached.
3
Q
At the equilibrium price, what happens?
A
Demand = Supply
At this point the price is called the market clearing price. This is the price at which sellers are clearing their stock at an acceptable rate.
