When we have studied equilibria so far, it has always been so-called partial equilibria. (A partial equilibrium is one where we assume that “everything else is unchanged.”) However, we have also seen that a change in one variable can lead to changes in many other variables, so the restriction that everything else is unchanged may not be very realistic.
As you’ve learned, consumers demand products and services at the lowest possible prices. In contrast, suppliers like Microsoft exist to make a profit—hopefully, a big profit. As you read this section, you’ll learn about the law of supply and how it is geared toward making profits.
We begin our study of microeconomics by looking at a market with many buyers and sellers, i.e. a market where there is a large amount of competition. We will study such a market in more depth in Perfect Competition, as well as other market types, but starting here makes it easy to get a feel for how the subject works.