The Basics of a Market: Supply and Demand and Equilibrium
To understand the basis for international trade, we need to explain how the price of a product is determined and why does the price change. Every product or service has a market composed of producers (suppliers) and consumers (demanders) of the product. The interaction of the suppliers and demanders determines the price and the quantity sold of a product.
Demand
To have a demand for a product, a consumer must want the product, can afford to buy the product, and finally has plans to purchase the product. Holding other variables constant, the most important determinant of the quantity demanded of a product is the price of the product. As the price of a product rises, a consumer ...
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