Economics: Difference between revisions

Revision as of 18:47, 4 September 2005

Revision as of 05:44, 5 September 2005

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''Main Article:'' [[Price]]

In order to measure the ebb and flow of supply and demand, a measurable value is needed. The oldest and most commonly used is ''price'', or the going rate of exchange between buyers and sellers in a market. Price theory, therefore, charts the movement of measurable quantities over time, and the relationship between price and other measurable variables. In [[Adam Smith]]'s ''[[Wealth of Nations]]'', this was the trade-off between price and convenience. A great deal of economic theory is based around prices and the theory of [[supply and demand]]. In economic theory, the most efficient form of communication comes about when changes to an economy occur through price, such as when an increase in supply leads to a lower price, or an increase in demand leads to a higher price.

[[Image:Moneybillscoins3.jpg|thumb|right|145px|[[Exchange rate]]s are determined by the relative supply and demand of different [[currency|currencies]] — an important issue in [[international trade]].]]