Price changes affect supply and demand relationships. Higher prices increase supply, lower prices decrease supply. Market equilibrium occurs where supply equals demand. Price elasticity measures responsiveness of demand and supply
Equilibrium occurs when supply and demand balance, leading to stable prices. Prices tend to fluctuate around equilibrium levels. Markets are rarely in perfect equilibrium but prices tend toward it
Emerged around 1900 to compete with classical economics. Focuses on supply and demand as driving forces in production and consumption. Consumers make decisions based on utility, not production costs. Markets naturally self-regulate through supply and demand
Disequilibrium occurs when market forces prevent reaching equilibrium. Keynes first proposed this theory in 1930s. Market equilibrium requires supply equal to demand at market-clearing price
Demand and supply curves show relationships between price and quantity in markets. Law of demand states that lower prices lead to higher consumer demand. Law of supply states that lower prices lead to lower producer supply
Perfect competition is defined by idealizing conditions for market equilibrium. Market reaches equilibrium where quantity supplied equals quantity demanded. Markets provide both allocative and productive efficiency. Perfect competition requires many sellers and buyers with perfect information