Chapter 4
Supply, Demand, and the Invisible Hand
In This Chapter
• The dynamics of supply and demand
• How free markets function
• What makes a monopoly
Transactions occur because various consumers, businesses, and government agencies have various wants and needs. In Chapter 2, you learned that these transactions all add up to gross domestic product, or GDP. Economists also refer to GDP as total demand. Economists analyze not only total demand but also demand for specific goods and services. The demand for a specific item depends on many factors, including its uses and importance, the size and age of the population, the prevailing fashions and tastes, and, of course, its price.
In a market economy, if there is demand for something, there ...

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