Answer Question 2.1, 2.2, 2.3, 2.5, 2.

Definition and reading materials

Markets are diverse. Buyers and sellers may decide to meet face-to-face to make an
exchange, such as customers exchanging money for goods in a supermarket. Markets may be
virtual such as Amazon's marketplace and consumers and suppliers are never likely to meet.
Markets can be local, national and international. Product markets facilitate the exchange of
goods and serves.

Factor markets or resource markets are where the factors of production are exchanged.In IB
Economics, competition is a rivalry between businesses trying to sell products to consumers
in market, and to consumers trying to purchase goods and services in that same market.
Competitive markets are markets composed of large numbers of sellers and buyers acting
independently, so that no one individual seller or small group of sellers has the ability to
control the price of the product sold. Here market prices are determined by the forces of
supply and demand, which is what we turn our attention to next.

Quantity demanded is the amount of a good or service that a consumer is willing and able to
purchase at a given price within a certain period of time. Demand implies that consumers
must not merely wish to purchase the product, but also possess sufficient funds to be in a
position to purchase it, and that the amount demanded is calculated over a certain time
period (e.g., daily, monthly and yearly). Effective demand is the amount of a good people are
willing to buy at given prices over a given period of time backed by the ability to pay.

The law of demand says that as the price of a good or service increases, the quantity
demanded decreases, and vice versa for a decrease in price, assuming ceteris paribus. There
is an inverse or negative association between price and quantity demanded.

Ceteris Paribis: "Other things being equal"; used as a reminder that all variables other than
the ones being studied are assumed to be constant.