He came up with the idea that prices are determined both by production costs and preferences. His analysis of demand (the preference-side of the story) and supply (the production costs-side of the market) is at the very heart of this course
Alfred Marshall (1842-1924).
A market is the set of all the consumers and suppliers who are willing to buy and sell a given good.
We say that a market has reached its equilibrium when the price and the quantity sold of a given good are stable.
Consumers and Suppliers are Price-Takers
An externality is a cost (or a benefit) that is incurred by (or accrued to) someone who is not involved in the production or consumption of a certain good.
Goods are Excludable and Rival
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