What is market price in economics?

The market price is the current price at which a product or service can be bought or sold. The market price of a product or service is determined by the forces of supply and demand. The price at which quantity supplied equals quantity demanded is the market price. The market price is used to calculate consumer and economic surplus.

What does price mean in economics?

Price refers to the amount of money required to purchase a product or service. Price can also be seen as a measure of a product’s value, insofar as people are willing to pay a certain monetary amount to buy it. (Read Milton Friedman’s Britannica entry on money.) Price plays an essential role in the economy.

How is market price determined in a free market economy?

In any free market economy, market price is determined by supply and demand. Changes in either of those factors will cause market price to increase or decrease. The market price is the cost of a product or service. In a market economy, the market price of a product or service fluctuates based primarily on supply and demand.