two birds one stone

What better way to study for an economics test than to blog? probably lots but whatever. For this chapter we went over the basics of supply and demand and what causes the difference in prices of goods. Alfred Marshall's model of supply and demand explains why neither cost of production nor value to purchaser is by itself enough to explain why some goods are cheap and others expensive. When the price lies above the equilibrium price there is an excess supply as less people want to or can afford to buy. This motivates producers to lower the price to a point that they are satisfied with yet can sell enough to eliminate the surplus. Using supply and demand curve graphs economist can predict price changes if either were to change.