Market Equilibration Process
ECO/561
January 27, 2014
Warren Matthews

Market Equilibration Process In economics, supply and demand is one of the most essential concepts and the foundation of the market economy. Consumers demand a product, and producers in the market supply the product to the best of their ability. When shifts in the equilibrium between supply and demand occur, the players in the market (sometimes unknowingly) work together to balance the two. When exploring the market equilibration process surrounding propane gas, it is evident that the abnormally frigid temperatures throughout the Midwest and Northeast, in combination with the long wet fall, are creating an unbalance.
The Law of Demand The law of demand according to McConnell, et al (2009) states, “…Other things equal, as price falls, the quantity demanded rises, and as price rises, the quantity demanded falls,” (p. 47, para. 3). However, looking more closely at the case involving propane will prove the importance of understanding the phrase "all things equal". Some factors influence the law of demand. Those factors include (1) consumer preferences, (2) the number of active buyers, (3) consumers’ incomes, (4) the prices of related goods, and (5) consumer expectations,” (McConnell, Brue, & Flynn, 2009, p. 48, para. 4). Focusing on the number of active buyers in the market in combination with consumer expectations allows one to see how these factors increase the demand of propane. One can reasonably assume as the temperature drops homeowners will turn up the heat, and in turn use greater amounts of propane. When this happens the number of active buyers in the market increases, and consumers expect propane to be available to heat their homes throughout the cold months. Consumers are willing to pay a higher price for propane because of the need for the product to heat their homes