00:01
So we've got a very strange question here, but let's try to walk through it and understand all the price.
00:06
First of all, what is a market? a market is a story about quantities as a function of prices.
00:12
People decide to buy different amounts as the price changes, and firms decide to supply different amounts as the price changes, right? demand slopes downwards.
00:23
People want more as the price falls.
00:25
Supply slopes upwards.
00:26
People want to sell more as the price rises.
00:29
So this leads us to the point of equilibrium, right? so equilibrium is defined, right? or i should say competitive equilibrium, there can be situations, other more complicated situations, is where supply is equal to demand, right? supply is equal to demand determines an equilibrium quantity and an equilibrium price.
00:56
Supply will always be equal to demand in other situations.
00:58
The classic one is the case of, say, a monopolist.
01:01
A monopolist because they're the only person in the market.
01:05
They don't have to compete, and the market behavior can be very different when there's no competition.
01:10
But when there is competition, demand and supplier are forced together, right? this is the efficient level of output.
01:24
Whenever a competitive market is in equilibrium, that is the efficient level of output, right? because efficiency here is equal to net benefits.
01:38
And we can see how much demanders and suppliers benefit from participating in this market if i connect these curves.
01:45
Imagine you're a demander, and remember the demand curve represents willingness to pay...