A market is a place where the buyers and sellers interact with each other and the exchange of goods and services takes place between them at a mutually agreed price level. The price level in the market is being determined at the intersection of the market demand and the market supply curves. The point is known as the point of equilibrium and the price corresponding to the equilibrium is known as equilibrium price and the corresponding quantity is known as equilibrium quantity.
The market demand curve is the summation of the individual demand curve of the economy. The demand curve and the price level have inverse relation with each other. This means that the demand decreases as the price increases and vice versa. Thus, the demand curve becomes a downward sloping curve in the economy. The market supply curve is the summation of the individual supply curves at different price levels in the economy. The increase in the price level leads to increased revenue and thus when the price increases, the supply increases in the economy. Thus, there is a positive relation between the price and supply which also causes the supply curve to be an upward sloping curve.
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