Class Lecture #34 - 11/21

This lecture talked about equilibrium and the price system...

Two questions that are always asked:
 1. How is each side (buyers and sellers) of market affected by a point on the curve?
 2. Whose plans are satisfied?

Consider two points on the curve:
  - Price below the equilibrium point....
        * low price = high demand, low supply..... shortage at that price
        * suppliers are satisfied because there are more than enough buyers to purchase their goods at that price
  - Price above the equilibrium point.....
        * high price = low demand, high supply...... surplus at that price
        * demanders are satisfied because there are more than enough sellers to buy from
The point where the supply curve meets the demand curve is the equilibrium point.... always strive for this point (neither group has incentive to change behavior)

Price system
- $$ lowers cost of engaging in a transaction
- Double coincidence of wants = don't have $ --> need to find someone who produces a good of value that also wants your good (bartering sucks!)
- if don't have $, hard to trade because you can't divide up goods (ex: guitar)