Financial Whirlpools

Appendix

In a competitive market, the interaction between supply and demand governs the price and quantity of goods, services, commodities, or other items that are bought and sold. This Appendix describes how supply and demand operate together and translates that relationship into systems thinking terms. Their interaction in the housing market is a fundamental aspect of our systems perspective for the economic crisis.

A.1 Relationship between Supply and Demand

Two features of a competitive market allow the supply and demand model to function. First “there are many buyers and sellers of the same good or service” and second, “no individual’s actions have a noticeable effect on the price at which the good or service is sold.”¹ Both criteria are true ...