... Market Equilibrating Process EC0/561 April 12, 2012 Professor Sella-Villa Abstract The purpose of this paper is to explain the market equilibrating process in relation to my personal experience supported by academic research. The following factors will be included in my explanation: law of demand and the determinants of demand, law of supply and the determinants of supply efficient markets theory and surplus and shortage. Market Equilibrating Process Not since the Great Depression of the late 1920’s that carry over into the 1930’s has the United States experience an economic downfall like our current economy recessions that we are recovering from that started in 2008. Understanding what an economic depression is will help individuals deal with their own economic experiences. Economics is the social science that examines how individual’s institutions and society make optimal choices under conditions of scarcity, (McConnell, Brue, Flynn, 2009). The two stakeholders that contribute to the market equilibrium process are the supply from the producer and demands from the consumers. The equilibrium process is equal when the producer and consumer needs are balance. Producers and consumers competition off sets the equilibrium process, producers with larger inventories are force to decrease their prices to undersell their competition. Consumers benefit...
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...Market Equilibrating Process Paper ECO/561 February 16, 2011 Market Equilibrating Process Paper Within any process, the achievement of market equilibrating is imperative in the business world. According to McConnell, Brue, and Flynn (2009), “Market equilibrium is a situation where the supply is equal to the demand”. The goal of many organizations is to create and continue to create market equilibrium. In this paper market equilibrating, law of supply and demand and inelasticity vs. elasticity will be furthered discussed. Law of Demand and the Determinants of Demand The quantity demanded falls when the price increases. Whereas, the quantity demanded rises when the price falls. According to McConnell, Brue and Flynn (2009), “Demand is a schedule or curve that reveals the various amounts of a product that consumers are willing to purchase at each of a string of potential prices during a specified period of time. Various prices are selected for a particular product in different quantities for the product. The law of demand is the correlation between the demand of quantity and price. For example, a designer coat is retailed for $200 at a department store in the early winter season. During an after Christmas sale, the coats are reduced by 50% to a cost of $100. This sale created more consumer purchases because the price was reduced. As the price went down, more consumers purchased the shoes. The law of demand was utilized throughout this sale process. Law of Supply...
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...revenue, pricing, and market stability. A manager must understand many factors to help a business increase revenue. One factor is that price times quantity yields total revenue for a product. Another relevant concept is that there are opportunity costs associated with any decision. Elasticity also affects revenues as managers change prices and quantities. Increasing Revenue OBJECTIVE: Choose methods to increase revenue in an organization. Resource: Ch. 1, 2, & 6 of Economics Content • Ch. 1: Limits, Alternatives, and Choices o The Economic Perspective o Theories, Principles, and Models o Microeconomics and Macroeconomics o Individuals’ Economizing Problem o Society’s Economizing Problem o Production Possibilities Model o Unemployment, Growth, and the Future • Ch. 2: The Market System and the Circular Flow o Economic Systems o Characteristics of the Market System o Five Fundamental Questions o The “Invisible Hand” o The Demise of the Command System o The Circular Flow Model • Ch. 6: Elasticity, Consumer Surplus, and Producer Surplus o Price Elasticity of Demand o Price Elasticity of Supply o Cross Elasticity and Income Elasticity of Demand o Consumer and Producer Surplus OBJECTIVE: Explain the market equilibrating process. Resource: Ch. 3 of Economics Content • Ch. 3: Demand, Supply, and Market Equilibrium o Markets o Demand ...
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...affects revenue, pricing, and market stability. A manager must understand many factors to help a business increase revenue. One factor is that price times quantity yields total revenue for a product. Another relevant concept is that there are opportunity costs associated with any decision. Elasticity also affects revenues as managers change prices and quantities. Increasing Revenue OBJECTIVE: Choose methods to increase revenue in an organization. Resource: Ch. 1, 2, & 6 of Economics Content • Ch. 1: Limits, Alternatives, and Choices o The Economic Perspective o Theories, Principles, and Models o Microeconomics and Macroeconomics o Individuals’ Economizing Problem o Society’s Economizing Problem o Production Possibilities Model o Unemployment, Growth, and the Future • Ch. 2: The Market System and the Circular Flow o Economic Systems o Characteristics of the Market System o Five Fundamental Questions o The “Invisible Hand” o The Demise of the Command System o The Circular Flow Model • Ch. 6: Elasticity, Consumer Surplus, and Producer Surplus o Price Elasticity of Demand o Price Elasticity of Supply o Cross Elasticity and Income Elasticity of Demand o Consumer and Producer Surplus OBJECTIVE: Explain the market equilibrating process. Resource: Ch. 3 of Economics Content • Ch. 3: Demand, Supply, and Market Equilibrium o Markets o Demand o Supply o Market Equilibrium o Application:...
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...MARKET EQUILIBRATION PROCESS ABSTRACT Market Equilibrium is a very important topic people face daily in economy. Understanding how market equilibrium is maintained is essential for business managers. This paper will explain the market equilibrating process. It will include the law of demand and determinants of demand; law of supply and determinants of supply. It will also include examples to better present the topic of surplus and shortage. The market of a certain product is in equilibrium when the amount offered of that product aligns with the amount needed. When demand is higher than what is being offered, businesses increase the offered quantities of their product as well the prices resulting in a decrease on demand. When the offer is higher than demand, businesses promote clearance to reduce inventory. Both scenarios show how companies tend to equilibrate price and quantities in the market. Competition among buyers and among sellers drives the price to the equilibrium price; once there, it remains unless it is subsequently disturbed by changes in demand or supply (McConnell, 2009). The law of demand implies that consumers will buy more of a product at a low price than at a high price. So, other things equal, the relationship between price and quantity demanded is negative or inverse and is graphed as a down-sloping curve. Some determinants of demand include: consumer tastes, the number of buyers in the market, consumer incomes, the prices of related...
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...Abstract A market occurs where buyers and sellers meet to exchange money for goods or services. The price refers to how supply and demand interacts to set the market price for the selling of goods. The concepts of the market equilibrating process will describe and analyze how its factors determine to purchase a Chevy Volt electric automobile during this economic crisis. Market Equilibrium Process Market equilibrium is a process that allows the number of goods by suppliers to equal the number of goods of demand. Once this happens the market at that moment is in a state of equilibrium. The market equilibrium price, p, and equilibrium quantity, q, are determined by where the demand curve of the buyers, D, crosses the supply curve of the sellers, S. The horizontal line of a graph below shows each unit from zero to quantity (q) the demand curve is above the supply curve, meaning that the consumer or customer is willing to pay more to buy those units than they cost to produce. The vertical line displays the prices on the graph. If the price is below the equilibrium the demand would be greater than the supply and there is a shortage. If prices are above the equilibrium the supply would be greater than demand and there is a surplus of supplies (McConnell, 2009). Laws of Demand and Determinants The law of demand is when the price is higher than the consumer is willing to pay for the product resulting in a lower demand. There are five ceteris paribus demand determinants...
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...Market Equilibrating Process Mariam Ibrahim ECO/561 June 06, 2011 Tom Hodgkiss The Amazon kindle was a enormous hit; it is surprising how technology grows fast enough that it comes up with an updated version in the same year. I was interested in how it sold out in five and a half hours the minute Amazon released it for the first time, and I always kept comparing it to the NOOK. This example is perfect to explain the market equilibrium process and how the supply and demand apply. The law of demand is simple, “there is a negative or inverse relationship between price and quantity demanded.”(Campbell R. McConnell, Stanley L. Brue, Sean M. Flynn, 2009, p.47 ), which basically means the when the price rises, the quantity demanded falls or vice versa. The determinants of demand can shift the demand curve and change the demand schedule such as change in buyer’s taste, numbers of buyers, consumer’s income, price-related goods, and consumer expectations. The law of supply is a positive relationship between price and quantity supplied (Campbell R. McConnell, Stanley L. Brue, Sean M. Flynn, 2009), which is basically means that if the price rises the quantity supplied will rise too. The determinants of supply are a few that can affect the supply curve, such as the resource prices, technology, taxes and subsidies, prices of other goods, producer expectations, and the number of sellers. This leads me to the market equilibrium, which means that the...
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...Competing views of the entrepreneur The term entrepreneur has become to have a broad definition over the years, with many authors debating over the types of characteristics that make up a person who can be classed as entrepreneurial. The word originally came from the French meaning 'one who takes between' but over the years the term has developed with varying definitions from academic literature, the media and often people classed as entrepreneurs themselves, causing great difficulty in finding a universal definition. In the late 18th Century, Cantillion and Say from the French school of thought were amongst the first to recognise the role of the entrepreneur. Cantillion first defined entrepreneurs as a 'risk taker', buying at a certain price and selling at an uncertain price. (Cited in Blaug 1986:220) Jean-Baptiste Say backed this up by stating entrepreneurs are 'the pivot of the economy, a vehicle for economic change. Deakins and Freel (2009). In the years to come, further concepts of entrepreneurs were developed and argued amongst academics. By examining the differing opinions from a broad spectrum of authors since the role was first distinguished, through the years where the meaning has become diverse and arguments have surfaced over the true meaning of entrepreneurship, I hope to make clear whether the term is so unclear to render it worthless or find some way of giving it some true common definition in today's society. To investigate the varying opinions and definitions...
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...This course applies economic concepts to make management decisions. Students employ the concepts of scarce resources and opportunity costs to perform economic analysis. Other topics include supply and demand, profit maximization, market structure, macroeconomic measurement, money, trade, and foreign exchange. Policies Faculty and students/learners will be held responsible for understanding and adhering to all policies contained within the following two documents: University policies: You must be logged into the student website to view this document. Instructor policies: This document is posted in the Course Materials forum. University policies are subject to change. Be sure to read the policies at the beginning of each class. Policies may be slightly different depending on the modality in which you attend class. If you have recently changed modalities, read the policies governing your current class modality. The discussion question points are now combined with the participation points for each week. You, as the instructor, may create a separate line item for discussion question points if you choose. Please note that some assignment points may have changed. Course Materials Ball, L. M. (2009). Money, banking, and financial markets. New York, NY: Worth Publishers. McConnell, C. R., Brue, S. L., & Flynn, S. M. (2009). Economics: Principles, problems, and policies (18th ed.). Boston, MA: McGraw-Hill Irwin. Pugel, T. A. (2009). International economics...
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...1 PED401. Applications and Cases in International Development Teaching Notes 1 The Big Push: what does it mean, and does it make sense for Ethiopia? The idea of the Big Push is one of the earliest in development economics, coined by Rosenstein-Rodan over 60 years ago in the context of a classic work on “the problem of industrialization of eastern and south-eastern Europe”. The core argument is that coordination problems, in the context of increasing returns, create the possibility of multiple equilibria. A poor country can be caught in a low-equilibrium “poverty trap”, government intervention can potentially solve the coordination problem, and “push” the economic into the better equilibrium allowing a “take-off” into sustained growth. The Big Push idea has returned to the center of development policy in the recent past. William Easterly (2006) described 2005 as the Year of the Big Push. It has done so in particular in the context of debates over Africa: the compelling normative case to transform development possibilities of Africans, has been associated with renewed emphasis on the positive case for a Big Push. This has been linked to the case for a major expansion in aid, notably in the work of the Commission for Africa and the Millennium Development Goals; Jeffrey Sachs has been a vigorous exponent of this linkage. This case concerns the analytics of the Big Push, the evidence and its applicability to a poor African country. It bridges issues of growth (from macro)...
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...Unit No.12 (Financial Management) Unit Code: AA/012/P013 Assignment Title: Expected Knowledge and Skills-- Finance Manager Assignment No. 12- AA/012/P013-IND Contents Acknowledgement 2 Task 1 3 What are the financial management and why it is necessary for an organization? 3 What are the financial objectives of the firm and how they are related to corporate strategy? 4 Corporate strategy is about the choices complete controls create regarding problems like the particular organization the company is in, whether new marketplaces would be joined or whether to take out from current marketplaces. These kinds of choices can commonly have substantial financial effects. If, for example, a decision is taken to enter a new manufacturing company, and current organization in that industry could be bought, or a new organization be started from the beginning (Van Horne, & Wachowicz, 2008). 5 How financial objective can be different in case of non for profit organization. 5 The financial objectives of the not-for-profit organization must agree with the objective of the organization and financial constraints. For example, if the not-for-profit organization is particularly pleased to be an organization, an organization increase national could cause you to lose its appeal. Compose a record of objectives that fit the objective of the not-for-profit organization and are possible objectives (Saunders, et. al. 2006). 6 Define the types of stakeholder a company have and...
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...| The Abuse of Keynes’ Theory of Government Spending | And Why Government Spending Needs to Stop | | Chase Cooper | 12/13/2012 | Political Economy Dr.Ramos Abstract: The goal of my research paper is to analyze and present how John Maynard Keynes’ theory on government spending is being abused by the American government insofar that the American government is not following the guidelines and foundations that premised Keynes’ theory, and instead are picking the parts of the theory that allow them to spend at unsustainable levels, creating problems that, one way or another, eventually have to be resolved. My research will prove how the American government is conducting fiscal policy in a way that abuses Keynes’ theory on government spending, and, as a result, why Keynes would not support the American government in their spending endeavors, despite using his theory as their justification. I will be critiquing the application of Keynes’ theory from the Austrian, specifically the works of Friedrich A. Hayek, and Monetarist perspectives, supported by arguments given by Milton Friedman. Section 1: Keynes’ Theory on Government Spending John Maynard Keynes published his famous work, The General Theory of Employment, Interest, and Money, in 1936, during the Great Depression. Economies all over the world were suffering severely from the Great Depression, and there was little hope of economic recovery in the near future. Keynes agreed with the classical economist’s notion...
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...The competitive advantage of nations: is Porter’s Diamond Framework a new theory that explains the international competitiveness of countries? A.J. Smit ABSTRACT The focus of this article is to clarify the meaning of international competitiveness at the country level within in the context of Porter’s (1990a) thesis that countries, like companies, compete in international markets for their fair share of the world markets. At a country level, there are two schools of thought on country competitiveness: the economic school, which rejects Porter’s notion of country competitiveness, and the management school, which supports the notion of competitiveness at a country level. This article reviews and contrasts the theories pertaining to these two schools of thought with specific reference to trade theories and the ‘theory’ of the competitive advantage of nations originally advanced by Porter (1990a, 1997a, 1998b, 1998c, 2000). Although Porter’s Diamond Framework has been extensively discussed in the management literature, its actual contribution to the body of knowledge in the economic and management literature has never been clarified. The purpose of this article is to explain why Porter’s Diamond Framework is not a new theory that explains the competitiveness of countries but rather a framework that enhances our understanding of the international competitiveness of firms. Key words: Porter, Diamond Framework, international competition, competitiveness of countries, international business...
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...TUTORIAL 1 BUSINESS PLANNING & FINANCIAL PLANNING 1. Candidate should explain that a stockholder owns part of a company and is entitled to income in the form of dividends. Stockholders also elect directors who run the company. Stakeholders are groups of people who have an interest in how the firm is run. These include stockholders, employees, management, creditors and customers among others. Each group is interested in the firm’s operation and profitability for its own reasons. All stockholders are stakeholders, but not all stakeholders are stockholders. 2. The two common sources of corporate financing are stocks (shares) and bonds. Shareholders are the owner of the firm in which they are entitled to dividend if firms generate profit. Bondholders are creditors to a firm. They receive fixed coupon payment (annually or semi-annually) until maturity of the bond plus principle at maturity. 3. Symmetric Information is a situation in which investors and managers have identical information about firms’ prospects. Asymmetric information is a situation in which managers have different (better) information about firms’ prospects than do investors. 4. The relationship between stockholders and the management is called the agency relationship. This occurs when the shareholders as principals hire their agents to act on their behalf. The possibility of conflicts of interest between them is termed as the agency problem. There are two types of agency costs, the direct costs originating from compensation...
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...SIGNALLING, STRATEGY & MANAGEMENT TYPE Introducing Framework T3 and GEMS for Business Strategy Patrick A. McNutt The usual disclaimer applies. The views expressed here are those of the author This is an E-book. It is available in camera copy format with free download from www.patrickmcnutt.com. December 2008 ACKNOWLEDGEMENTS Thank you for reading the E-book and making a contribution to the charity as identified on my web portal. The E-book can be read independently or in conjunction with the Kaelo v2.0 software tool. Some of the arguments are filtered from McNutt (2005): Law, Economics and Antitrust and from books referenced in the E-book. There are indeed numerous references and secondary readings recommended in the E-book. These should be read as well. They will be fully referenced as we continue together to write this E-book on the web. Interesting books on related themes to read are Roberts (2004): The Modern Firm: Games, Strategies and Managers and Nalebuff and Dixit (2008): The Art of Strategy. For my MBA students you will be reading either Baye (2008): Managerial Economics and Business Stratagy or Besanko (2007): Economics of Strategy. For clients using my services, a note of thanks and for management in general who may happen upon this E-book a set of business slides are available as one set called Framework T3 and GEMS which is available from the author. They will appear also on my web page. Please email your comments to me via my web portal at www.patrickmcnutt.com...
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