Consumers and producers meet in a wholesale “pit’ market for apples. With repetition, market price converges to the price equating supply and demand.
Key Learning Objectives:
- Market Equilibrium: Without external guidance, the competitive market finds the price equating quantity supplied with quantity demanded.
- Market Efficiency: Self-interested consumers and producers in a competitive market for a private good (without externalities) find the efficient (i.e., surplus maximizing) allocation of that good.
- Market Adjustment: Subsequent to a shift in supply (or demand), the competitive market finds the new price equating supply and demand, and thus the new equilibrium quantity transacted.
- Main Courses: microeconomics; macroeconomics
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