The Theory of Price

Authors: George Joseph Stigler

Key Ideas

1. The theory of price explains how prices are determined in a market economy. It explores the interaction of supply and demand.

2. Stigler argues that the theory of price is a fundamental building block of economic analysis.

3. Prices serve as signals in the market, guiding individuals and firms to make economic decisions.

4. The law of demand states that as the price of a good increases, the quantity demanded decreases, and vice versa.

5. The law of supply states that as the price of a good increases, the quantity supplied increases, and vice versa.

6. Equilibrium price is the price at ....
.....

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Quiz

1. What is the theory of price?

A theory that explains how prices are determined in a market economy.

A theory that explains consumer preferences.

A theory that explains government interventions in markets.

A theory that explains trade deficits.

2. Why is the theory of price important?

It provides a fundamental understanding of economic analysis.

It determines consumer preferences.

It promotes government interventions in markets.

It explains the causes of trade deficits.

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