Economics 1500
ECS1500
Households, as the owners of factors of production, offer their labour, natural resources and capital in the
market for factors of production, and in return receive income (wages and salaries, interest, rent, etc.)
from the firms. Hence there is a flow of services from the households to the firms, and a reverse flow of
money from the firms to the households.
Households sell their factors of production to firms. Firms use these factors to produce goods and services
that are sold in the goods market to households, who use their income to buy the goods and services.
, A market-clearing price is the price of a good or service at which quantity supplied is equal to quantity
demanded, also called the equilibrium price. The theory claims that markets tend to move towards this
price.
The equilibrium situation is very neatly shown in graphical form in figure 3.7. The demand and supply
curves, which both appear in the diagram, intersect at only one point.
Follow the link below for a more detailed explanation of market equilibrium.
https://www.khanacademy.org/economics-finance-domain/microeconomics/supply-
demandequilibrium/market-equilibrium-tutorial/v/market-equilibrium
ECS1500
Households, as the owners of factors of production, offer their labour, natural resources and capital in the
market for factors of production, and in return receive income (wages and salaries, interest, rent, etc.)
from the firms. Hence there is a flow of services from the households to the firms, and a reverse flow of
money from the firms to the households.
Households sell their factors of production to firms. Firms use these factors to produce goods and services
that are sold in the goods market to households, who use their income to buy the goods and services.
, A market-clearing price is the price of a good or service at which quantity supplied is equal to quantity
demanded, also called the equilibrium price. The theory claims that markets tend to move towards this
price.
The equilibrium situation is very neatly shown in graphical form in figure 3.7. The demand and supply
curves, which both appear in the diagram, intersect at only one point.
Follow the link below for a more detailed explanation of market equilibrium.
https://www.khanacademy.org/economics-finance-domain/microeconomics/supply-
demandequilibrium/market-equilibrium-tutorial/v/market-equilibrium
