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Assume Lianna buys coffee beans in a competitive market. It follows that:
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3. Supply and Demand
Introduction to Supply and Demand
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In a competitive market for a good, do businesses demand the good or supply the good?
A
Businesses neither demand nor supply; only households participate in markets.
B
Businesses supply the good to the market.
C
Businesses demand the good from the market as consumers.
D
Businesses both demand and supply the same good in the same market, so the distinction is meaningless.
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Understand the roles of different economic agents in a competitive market: households and businesses.
Recall that households typically demand goods and services for consumption, while businesses produce goods and services to sell.
Recognize that in the market for a good, businesses act as suppliers because they provide the good to the market.
Note that businesses may demand inputs (like raw materials) in other markets, but in the market for the final good they produce, they are suppliers.
Conclude that the correct statement is: businesses supply the good to the market.
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