ECN 601 Economics Of Information

Task:

A market refers to a group of buyers and sellers of a good or a service and the institution or arrangement by which they come together to trade. The interaction of supply and demand determines the quantities the suppliers are willing and able to produce, as well as the market price. According to the law of demand, people demand more (quantity demanded) when the price declines. Alternatively, if the price increases, the quantity demanded for the commodity decreases; however, the degree of change in quantity demanded depends on the level of the elasticity of demand that commodity has. If a given commodity is a necessity or if it has fewer or no substitutes, then a change in the price will not affect demand significantly. For example, we don’t respond the same way when the price of gasoline changes as we respond when the price of soft drinks changes. Gasoline is a necessity commodity, but soft drinks have many substitutes and are not a necessity.

Market structure is defined as the organizational and other characteristics of a market that affect the nature of competition and pricing. Suppliers