1. A market is the process of buyers and sellers exchanging goods and services.

2. Buyers determine the demand side while the sellers determine the supply side
3. Demand: the willingness and ability of buyers to purchase different quantities of
goods and services at differences prices during a specific time period.
4. Law of demand:
The quantity of demand varies inversely with its price
When the price of a good or service increase, the quantity demanded
decreases.
5. Why demand curve slope down:
Observe behavior
Consumer will buy more goods and services at lower prices than higher
price

Diminishing marginal utility

A buyer will receive less satisfaction from each successive unit consumed
So , consumer will only buy more if the prices decreased.

Substitution and income effect

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If the price of A increase the quantity demanded for A will decrease,

buyer will switch out from A into B
A increase in price will reduce a buyers purchasing power.

Quantity of demand
Movement along the
demand curve
Change of prices

Demand
A shift in the demand curve
Prices of related good
Number of demander
Income of demander
Tasters of demander
Expectation

6. Supply : the willingness and ability of seller to produce and offer different
quantities of good and service at different prices during a specific time period.
7. Law of supply :
The quantity of supply varies directly with the price of the good
The higher the price of a good , the greater the quantity supplied
8. Why supply curve slope upward:
Business provide goods and services hoping to make a profit
Profit is the money a business has left over after it covers its cost
The higher the selling price, the more the profit a business will make
A higher price is an incentive to producer to produce more of a good
This incentive is in the form of higher profit

Quantity of supply
A movement along the supply curve
Price of a good

Supply
A shift in the supply curve
Weather
Government regulation
Number of supplier
Input prices
Technology
Expectations

9. The market equilibrium is found at the point which the market supply and market
demand curve intersect
10. The price at the intersection of market supply and market demand is called the
equilibrium price
11. The quantity at the intersaction of market supply and market demand is called the
equilibrium quantity
12. If the market price is charged above the equilibrium price, quantity supplied will
greater than quantity demanded , a surplus will exist.
13. If the marker price is charged below the equilibrium price , quantity demanded
will greater than quantity supplied , a shortage will exist.