FC006 – Economics in an International Context


Added on  2020-04-29

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Running head: ECONOMICSEconomicsName of the StudentName of the UniversityAuthor note
FC006 – Economics in an International Context_1

ECONOMICS1In common terms, market refer to a place where goods are exchanged at wholesale orretail prices. Therefore, market is a place comprising of small and big shops, stalls and hawkersselling a variety of goods (Frank, 2014). However, the definition of market in economics isdifferent than that understands commonly. The idea of market is not limited to a particular place.It is an arrangement that enables buyers and sellers to come in contact either directly or indirectlyand exchange goods and services. Therefore, the concept of market in economics goes beyondthan a fixed location. Market involves some essential elements. Any market needs to have goods and servicesto be exchanged. The important players of market are buyers and sellers. Therefore, marketinvolves existence of buyers and sellers. The buyers and sellers come in contact to exchangegoods and services. A common medium of exchange is another key element of market (Fine,2016). However, the term market in economics does not correspond to a fixed location, buyersand sellers need to come in contact by some means or others. A free market is one that works autonomously. In this kind of market, the supply anddemand forces work to bring equilibrium and ensure efficiency. The two basic concepts relatedto market are demand and supply. Demand refers to the desire of buyers to buy somethingsupported by their purchasing power (Baumol & Blinder, 2015). Supply in the market is refers tothe sellers willingness to sell given their minimum production cost. Supply is the availableamount of goods in the market. Market is organized with the behavior and interaction of buyersand sellers as reflected from the demand and supply condition. The equilibrium price in the market is determined where the interest of buyers and sellersmatch at a common point. The demand curve represents the relationship between price andquantity demand of a commodity. The law of demand suggest an inverse relation between price
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ECONOMICS2and quantity and hence the demand curve is downward sloping (Kolmar, 2017). The supplycurve shows relationship between price and quantity supplied. From the law of supply a positiverelation is suggested and therefore, supply curve supply curve is positively sloped. The balancebetween supply and demand indicates equilibrium in the market. The stability in the equilibriumposition is restored by the adjustment of price mechanism named invisible hand by Adam Smith.This is shown in the figure below.Figure 1: Equilibrium in the free market (Source: As created by Author)
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