When it comes time for someone to buy a new cell phone he might spend time researching different kinds to find the ideal one There are many online and local providers providers eagerly competing for his business After researching the competition he finds the phone and the plan at the price he thinks is right for him In another example neighborhood children have a lemonade stand They sell one cup of lemonade for 50 cents It’s a hot day Many people are turning out to buy lemonade and support their business Meanwhile thousands of miles away a student wants to buy a college textbook She finds the book for sale on an online marketplace and makes a bid Other people also bid for the book Her bid wins and she makes the purchase Every day people buy goods such as cell phones drinks and textbooks They also buy services including doctors doctors visits haircuts and car and home repairs A consumer is a person who buys a good or service to consume or use Sellers offer products or services for sale They provide a platform for buyers to shop for different products or services services they need or want In return for providing a product or service sellers earn money Buying and selling is about bringing two groups together A market consists of the buyers and sellers for a particular good or service 4 INTRODUCTION
Buyers put a lot of research into finding just the right type of cell phone Both groups have incentives to participate in the exchange of goods and services Incentives for buyers to purchase purchase a specific product include having a preference for that product and believing it to offer the best value for the price Another incentive for buyers is the convenience of buying the product Incentives for sellers include the willingness to part with an item the opportunity to sell it at a good price and the ability to make a profit from the sale Buyers and sellers must agree on the price of the purchase purchase Price indicates the value of a good or service It is both 5
the amount that a seller is willing to accept for a product and the amount that the buyer is willing to pay If a price is too high buyers will not make the purchase if the price is too low sellers will not offer the product for sale Prices are signals to both buyers and sellers They tell market participants how to divide up resources If buyers are choosing to purchase more apples than oranges at given prices it signals producers to use resources to produce and offer more apples Prices also ration limited resources For example a piece of land can be used either for apple or orange trees That piece of land is a limited resource Buying and selling involves decisions What goods should a consumer buy What services should a seller offer What is the price of a given product and how many should be made What are the incentives for a purchase or sale Microeconomics is a branch of economics that answers these questions by focusing on the behavior of individual consumers and firms 6 Buyers and Sellers
CHAPTER ONE Do You Demand It Buyers include individuals groups of people businesses organizations and governments Buyers demand goods and services In economics demand is about being willing and able to buy something like wanting a new shirt and having the 15 to pay for it When a buyer makes the 15 purchase he or she takes ownership of the shirt A buyer may want a new shirt but he or she must be able to pay the cost of the item If a shopper only has 10 to spend he or she cannot buy a shirt that costs 15 So price affects the transaction or the exchange of money for a good or service The prices of substitutes and complements also affect transactions A substitute is a good or service that can be used as a replacement A person may view several kinds of T-shirts as comparable options If one T-shirt costs 15 and another comparable T-shirt costs 25 the buyer will most 7
