ABSTRACT
This chapter provides examples of a market and a market transaction. It describes the key institutions that make markets work and analyzes how those institutions support markets. The chapter examines the assumptions upon which the supply and demand model rests. It explains the concept of equilibrium and why markets tend toward an equilibrium price and quantity using supply and demand curves and the theory of demand and the theory of supply. Market analysis involves understanding supply and demand along with the major institutional and technological structures that affect market behavior. In a market capitalist economy, creating and safeguarding the institutions that make markets work is a major role for government. The number of buyers, and especially the number of larger buyers, has a big influence over the demand for a product. Technology can be a major driver of the costs of production and therefore a major determinant of the location of the supply curve.
