6.

The role of markets in allocating

resources
The Market System
The market system refers to the method of allocating scarce resources through the market
forces of demand and supply. Markets consist of buyers and sellers.
Buyers: who have demand for a particular good or service
Sellers: suppliers of a particular good or service

Market Equilibrium
the market system establishes market equilibrium where demand equals supply, as shown in
the graph, at this position, the market is cleared of any shortages or surpluses.

Market Disequilibrium
Market disequilibrium occurs when the market price is either above or below
the equilibrium price.

above equilibrium
If the price of a product is above the equilibrium price, the product is deemed to be too
expensive

6. The role of markets in allocating resources 1

 for consumers, so the quantity supplied will exceed the quantity demanded.

below equilibrium
if the price of a product is below the equilibrium price, the product
is deemed to be too cheap to attract sufficient supply, so the quantity demanded
will exceed the quantity supplied

Price Mechanism
refers to the system of relying on the market forces of demand and supply to allocate
resources.

6. The role of markets in allocating resources 2