A market is a set of arrangements by which buyers and sellers exchange goods and services.

Demand is the quantity that buyers wish to purchase at each conceivable price.

Supply is the quantity of a good sellers wish to sell at each possible price.

The equilibrium price is the price at which the quantity supplied equals the quantity demanded.

Excess supply exists when the quantity supplied exceeds the quantity demanded at the ruling price. Excess demand exists when the quantity demanded exceeds the quantity supplied at the ruling price.

The demand curve shows the relation between price and quantity demanded, other things equal.

The supply curve shows the relation between price and quantity supplied, other things equal.

A price increase for one good raises the demand for substitutes for this good but reduces the demand for complements to the good.

For a normal good demand increases when incomes rise. For an inferior good demand falls when incomes rise.

Comparative static analysis changes one of the ‘other things equal’ and examines the effect on equilibrium price and quantity.

Free markets allow prices to be determined purely by the forces of supply and demand.

Price controls are government rules or laws setting price floors or ceilings that forbid the adjustment of prices to clear markets.