3.1: Markets and Prices Flashcards
What is a market?
any arrangement that enables buyers and sellers to get information and to do business with each other.
What are the three varieties of markets?
Some markets are physical places where buyers and sellers meet and where an auctioneer or a broker helps to determine the prices. Examples of this type of market are live car and house auctions and the wholesale fish, meat, and produce markets.
Traders in some markets are people spread around the world who never meet and know little about each other but are connected through the Internet or by telephone. Examples are the e-commerce markets and the currency markets.
But most markets are unorganized collections of buyers and sellers. You do most of your trading in this type of market. Each buyer can visit several different retailers, and each seller knows that the buyer has a wide choice.
competitive market definition?
a market that has many buyers and many sellers, so no single buyer or seller can influence the price.
On what condition will producers offer items for sale?
Producers offer items for sale only if the price is high enough to cover their opportunity cost.
How do consumers respond to changing opportunity costs?
And consumers respond to their changing opportunity cost by seeking cheaper alternatives to expensive items.
What is money price?
Number of dollars that must be given up in exchange for an object (the amount of money needed to buy it)
What is relative price?
Ratio of one price to another; synonym to opportunity cost
How does the demand and supply model determine relative price?
The demand and supply model that you study in this chapter determines the money price and the quantity traded in a market, holding constant the money prices in other markets.
So technically comparing the price in one market relative to the prices in other markets.
