For most goods – like cars or shoes or groceries – the market does a good job of determining how much producers should supply and at what price to sell it. It does this by matching the quantity that consumers are willing to buy at a given price to the quantity that suppliers are willing to sell at that price. The market – through the interaction of supply and demand – then arrives at a price at which the quantities consumers are willing to buy is equal to the quantity suppliers are willing to provide. The figure below illustrates this. In this example, producers will supply 45 units and consumers are willing to buy 45 units at a price of $45. At a higher price, say $50, producers would supply 50 units, but consumers would only be willing to buy 40. At a lower price, say $30, consumers would be willing to buy 60 units, but producers would only 30 units.
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