Chapter 4Supply and Demand inthe Market for Goods

In the last chapter we referred to the way in which prices, acting as signals, direct production towards goods and services that people want to buy, and ration the available quantities among persons prepared to pay for them. Our present task is to examine more closely the working of supply, demand and price in the market place. In this chapter we will concentrate on the markets for goods or commodities. In the next, we will look at the working of the price mechanism in markets where factors of production are bought and sold.

We already know that the market price of a commodity depends upon demand and supply. Our next step is to examine more closely each of these. We shall proceed by considering ...

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