Demand and Supply in a Market System

Lecture 2

Summury

Cies.

The market system is an interrelated set of markets for goods, services and inputs. A market is defined as the interaction of all potential buyers and sellers of a good or class of goods that are close substitutes. The economic analysis that is used to analyze the overall equilibrium that results from the interrelationships of all markets is called a "general equilibrium" approach.

In principles of economics, most models deal with partial equilibrium. Partial equilibrium is the analysis of the equilibrium conditions in a single market (or a select subset of markets in a market system).

In a partial equilibrium model, usually the process of a single market is considered. The behavior of potential buyers is represented by a market demand function. Supply represents the behavioral pattern of the producers/sellers.

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