While the first few chapters of this book have mentioned a “market” for certain products, we have not yet formally defined a market. A product market is any mechanism through which buyers and sellers meet to exchange goods and services. There are also factor markets, like the labor market, where buyers and sellers exchange the factors of production. We address factor markets in Chapter 10, but our focus now is on product markets. We also show in this chapter how economists believe competitive markets come to an efficient equilibrium outcome and what happens to this outcome when the government intervenes in the market.
After completing this chapter, the student should be able to:
1. Describe the characteristics ...