Originally Posted by
superangrypenguin
You're going to have to explain it...
You said AC sets the prices and that the invisible hand isn't at play. I said its about supply and demand..in a long winded fashion.
Just to give you an example, in a free market everyone would pay the same price for the same product. My (pet) point really is that we use the word market loosely, and attributing to it qualities that are in reality associated with features than are gone in the loose usage.
Roughly, in the free market model of Adam Smith, both suppliers and buyers are characterized by a curve quantity vs. price. With opposite slopes. Market price is where both curves meet.
Economically optimal. Maximizes output and zeroes profit.
(Never truly existed of course.)