Buyers and sellers trade goods based on their values and costs using a continuous double-auction format.
Key Learning Objectives:
- Market Equilibrium: Without external guidance, the competitive market finds the price equating quantity supplied with quantity demanded.
- Market Efficiency: Self-interested Buyers and Sellers in a competitive market for a private good (without externalities) find the efficient (i.e. surplus maximizing) allocation of that good.
- Market Adjustment: After a shift in supply (or demand), the competitive market finds the new price equating supply and demand, and thus, the new equilibrium quantity transacted.
- Inefficient Market Interventions: A market intervention (binding price control, tax, or subsidy) alters the equilibrium price and quantity in a competitive market and will reduce surplus in a market for a private good without externalities.
- Main Courses: microeconomics; macroeconomics; managerial economics; strategy
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