All societies essentially make economic choices. Society needs to make choices about, what should be produced, how those goods and services should be produced, and who is allowed to consume those goods and services. Under conditions of competition, where no one has the power to influence or set price, the producers and consumers together determines the price of a product, and the price determines what is produced, and who can afford to consume it. There are two independent factors that determine price in competitive markets which are demand and supply. If markets were not competitive, a single seller or buyer could control and set a price. Competition needs flexible remote pricing. Suppliers must not work together to influence prices, and each supplier must be able to enter or exit a market at will.
Price provides the incentive to both the consumer and producer. High prices encouraged more production by the producers, but less consumption by the consumers. Low prices dampen production by the producer, and encouraged consumption by the consumers. Both incentives push the price to balance the forces of consumption (demand) and production (supply). This is called balance equilibrium. Demand is a schedule or a curve that shows the various amounts of a product that consumers are willing and able to purchase at each of series of possible prices during a specified period of time. The quantity demanded for a consumer at different prices can be combined into a market demand. Market demand then is simply, the sum
of all individual demand relationships. The demand schedule, graphically is the demand curve, represents the amount of a good that buyers are willing and able to purchase at various prices. The demand curve is almost always represented as downwards-sloping. This means that as price decreases, consumers will buy more of the good. The demand relationship shows an indirect relationship between price and the quantity demanded. For example, a local grocery store...