Market

A market is defined as the sum total of all the buyers and sellers in the area or region under
consideration. The area may be the earth, or countries, regions, states, or cities.

The value, cost and price of items traded are as per forces of supply and demand in a market. The
market may be a physical entity, or may be virtual. It may be local or global, perfect and
imperfect.

Demand
Demand is an economic principle that describes a consumer's desire and willingness to pay a
price for a specific good or service. Holding all other factors constant, an increase in the price of
a good or service will decrease demand, and vice versa.

Supply
Supply is a fundamental economic concept that describes the total amount of a specific good or
service that is available to consumers. Supply can relate to the amount available at a specific
price or the amount available across a range of prices if displayed on a graph. This relates closely
to the demand for a good or service at a specific price; all else being equal, the supply provided
by producers will rise if the price rises because all firms look to maximize profits.

Normal goods
A normal good is a good or service that experiences an increase in quantity demanded as the real
income of an individual or economy rises. A normal good is defined as having an income
elasticity of demand coefficient that is positive but less than one. A good can also be classified as
a luxury good or inferior good.

Inferior goods
An inferior good is a type of good for which demand declines as the level of income or
real GDP in the economy increases. This occurs when a good has more costly substitutes that see
an increase in demand as the society's economy improves. An inferior good is the opposite of
a normal good, which experiences an increase in demand along with increases in the income
level. Inferior goods can be viewed as anything a consumer would demand less of if they had a
higher level of real income.

Substitute good

Substitute goods are two goods that could be used for the same purpose. If the price of one good
increases, then demand for the substitute is likely to rise.Therefore, substitutes have a positive
cross elasticity of demand.
Complementary Goods

A complementary good is a good whose use is related to the use of an associated or paired good.
Two goods (A and B) are complementary if using more of good A requires the use of more of
good B.
For example, the demand for one good (printers) generates demand for the other (ink cartridges).
If the price of one good falls and people buy more of it, they will usually buy more of the
complementary good also, whether or not its price also falls. Similarly, if the price of one good
rises and reduces its demand, it may reduce the demand for the paired or complementary good as
well.

Unrelated goods
Unrelated goods are goods that have a zero cross elasticity of demand. Changes in the price of
one good will have no effect on the demand for an independent good. Thus independent goods
are neither complements nor substitutes.

Market Equilibrium

Consumers and producers react differently to price changes. Higher prices tend to reduce
demand while encouraging supply, and lower prices increase demand while discouraging supply.

Economic theory suggests that, in a free market there will be a single price which brings demand
and supply into balance, called equilibrium price. Both parties require the scarce resource that
the other has and hence there is a considerable incentive to engage in an exchange.

Elastic Demand

Demand elasticity refers to how sensitive the demand for a good is to changes in other economic
variables, such as the prices and consumer income. Demand elasticity is calculated by taking the
percent change in quantity of a good demanded and dividing it by a percent change in another
economic variable. A higher demand elasticity for a particular economic variable means that
consumers are more responsive to changes in this variable, such as price or income.

Inelastic Demand

A situation in which the demand for a product does not increase or decrease correspondingly
with a fall or rise in its price. From the supplier's viewpoint, this is a highly desirable situation
because price and total revenue are directly related; an increase in price increases total revenue
despite a fall in the quantity demanded. An example of a product with inelastic demand is
gasoline.
Unit Elasticity

A type of price elasticity that assumes a move higher in prices will cause a proportional decrease
in demand. For example the unit elastic demand for a one dollar move higher in the price of a
good will generally cause a one unit decrease in the demand of the same good, leaving revenues
unchanged.

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