...Market Equilibration Process Lindsey Brito Prof. Boloorian ECON/561 LDR531 Market Equilibration Process The United States of America is essentially a free market economy, because it is facilitated by supply and demand within our society. Although, America is essentially a free market there is still some government regulations put in place to guarantee fair practices. A true free market would mean that buyers and sellers would conduct their business without any government regulations. A free market that we all see and experience is the automaker market. Numerous automakers are in constant competition to ensure that their product is outperforming the other products on the market. The automakers industry is facilitated by supply and demand. For example when we saw automobiles featuring things such as, the rearview camera, blind spot check, and so on, initially in the luxury cars. Now all automakers have innovated to create new features to compete with other automakers. Another example of how efficient and innovative automakers can be is, with the demand for automobiles with better fuel efficiency; we are now seeing cars from mid-size to SUV’s with exceptional fuel efficiency. All this innovation was done without any government regulations or mandates. Now we have American automakers competing with foreign automakers in regards to the features and fuel efficiency that each automaker is introducing into the market. When gas and oil prices began to rise, we then saw...
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...Market Equilibration Process The equilibrating process is the competition between the buyers and the sellers, the supply and demand, the surplus and shortage. The equilibrating process is important to businesses and managers to know and understand. The economic principles work together to maintain a market equilibrium that can grow or demolish a business. Pizza Mondo is a business that sells whole pizzas or a slice of pizza and will be used to describe the market equilibration process. The law of demand and the law of supply will be explained along with the determinants of each. The efficient markets theory and the surplus and shortage will also be discussed. Law of Demand “A negative or inverse relationship between price and quantity demanded” (McConnell, 2009, p.47) is the law of demand. For Pizza Mondo if the price of their pizza goes up then the quantity demand will go down. However, if the price of the pizza goes down then the demand or quantity will go up. Some determinants of the demand are the change in a buyer’s tastes such as pizza becomes a new fitness food, change in income that increases the demand, change in the consumers’ expectations, population size, and advertising. Graphing the demand curve by using the demand schedule the relationship between quantity and price can be seen as in example A and B. Example A is an individual consumer and example B is a total market. Law of Supply The law of supply states “that there is a positive relation between the...
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...Markets are constantly adjusting to the market equilibration. Being able to interpret the different factors in a market of when consumers purchase (demand), market inventory (supply), surplus and shortage are important to understand for a business to maximize their earnings. Market equilibration process is, “the interaction of market demand and market supply adjusts the price to the point at which the quantities demanded and supplied are equal” (McConnell, Brue, & Flynn, 2009). Many factors go into market equilibration process such as the law of demand and determinants of demand and the law of supply and the determinants of supply. Understanding these laws will enable the market to become an efficient market. Market Equilibration is easily understood with the example of bananas. Let’s say this week the market is selling bananas for $1.00 / lb and at that rate consumers purchase 5000 lbs of bananas but really want to purchase 20000 lbs of bananas at that price creating a shortage of bananas because everyone is rushing out to get bananas. This will cause the market to increase the price of bananas and produce more bananas. Let’s say next week the market raises the price of bananas to $3.00 / lb and increases the supply of bananas to 15000 bananas when consumers were only going to purchase 10000 bananas at that price creating a surplus of bananas. At the end of the week the market takes a close look at how much bananas are being sold for and how many are being bought, to find...
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...Market Equilibration Erick T. Bertram ECO/561 May 19, 2011 Dr. David Booker Market Equilibration The market equilibration process occurs when the market can reach and maintain a balance between the supply and demand. It also includes what manufacturers take in consideration of what can help lead their firms so they can maximize profits with units sold and match what consumers are willing to spend on an item. This will lead to market equilibration. With family, finances must have equilibrium to maintain peace and happiness. Prior to planning vacations, making major purchases there are several options to consider. What should be done is assess the family finances. Families need to account for all income during each pay period. Then figure what is going out to pay monthly expenses like rent, electricity, water, credit cards, cable, cell phones, and include putting money into the family savings. This information will help to determine the families’ income so they can plan the next major purchase or family vacation. If planning a vacation there needs to be consideration for the total cost and what is available to spend. Some simple reasons to observe the law of demand, first is there a substitution effect can the family find a similar vacation at a lower price, and second is the real income effect, has there been a change in a families purchasing power. This is true in today’s current economy. When there is a change in determinants of demand in the family example; income...
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...Market Equilibration Process Dee Fullington University of Phoenix ECO/561 Kathleen Crump May 2, 2011 Market Equilibration Process The last time I bought fresh produce, it was sticker shock. I decided to do a little research into why produce is so expensive. I discovered I bought the produce in the United States grower’s off-season. Produce has elevated prices in the off-season because of imported produce into the United States from foreign companies that has opposite growing seasons. Another reason for the shock is the cost of producing fresh produce. The cost has risen at approximately 4% annually since the beginning of the 2000s. Reasons for the elevated costs of growing produce is linked to new regulations for land use, importing costs and regulations, weather, irrigation, and technology. Along with the above reasons, market information for supply and demand will also help determine quantities and price. Market information will tell what the consumers buying trends are, if they are buying a substitute product at a reduced price or if the consumer is buying the product at the current price. Wholesalers will know what the demand for consumers and producers are. Market information informs growers of the type of crops the consumer demands, the quantity, and the season. By studying the market information the growers can plan the types of crops they plant and when they plant. The market information will also inform the growers of predictable and unpredictable changes...
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...Market Equilibration Process Market Equilibration Process It is important for business managers to understand how market equilibrium is maintained. It is essential for mangers to know how to apply economic principles, specifically supply and demand, to everyday business decisions. In this paper I will describe several economic concepts, such as market equilibrium, supply and demand, and apply their relationship to a real world event. Market Equilibrium Market equilibrium is a very important concept in the study of economics. “Market equilibrium is a market state where the supply in the market is equal to the demand in the market (“Market Equilibrium in Economics,” 2015).” Often times the market is not in equilibrium, meaning that the quantity supplied does not equal the quantity demanded from consumers. When this occurs it creates shortages or a surplus of goods. A surplus happens when there is excess supply or the quantity supplied is greater than the quantity demanded. A shortage occurs when there is excess demand or the quantity demanded is greater than the quantity supplied (“Market Surpluses & Market Shortages,” 2006). Ultimately, the concept is derived from the laws of supply and demand, which will be discussed in the following paragraphs. Supply “Supply is a schedule or curve showing the various amounts of a product that producers are willing and able to make available for sale at each of a series of possible prices during a specific period” (McConnell...
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...Market Equilibration Process To conduct any business in the market there are two sides supply and demand that needs to interact with each other. The market equilibration process is the process where suppliers supply product to the exact quantity demanded and there is no excess product. This results in efficient market to conduct business. This paper describes how housing prices in market is affected by changes in supply and demand so that we can have better understanding of equilibration process. The main concept in economics are supply and demand in a market to conduct business. Law of demands states that for any goods or service as the price falls, the quantity demanded rises and also when price rises, the quantity demanded falls (McConnell, Brue, & Flynn, 2009). The relationship between price and quantity is negative and downward sloping curve as seen in Figure (b) in Appendix A. Price is one of the main factor related to quantity demanded but there are also other factors known as determinates of demand such as buys preference, number of buyers, incomes of buyers and prices of related goods (McConnell, Brue, & Flynn, 2009). Law of supply states quantity supplied rises as price rises and as quantity supplied decreases price also decreases (McConnell, Brue, & Flynn, 2009). Quantity and price are directly related to each other therefore creates upward sloping curve as seen in figure (c) in Appendix A. Like demand, the efficiency of supply are determined by factors such as...
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...Market Equilibration Process Vonda Herrin ECO/561 October 8, 2013 Emmanuel Welbeck Market Equilibration Process Having equilibrium in the market is the same as having equilibrium in our daily activities. Economic equilibrium is “a condition or state in which economic forces are balanced. It can also be defined “as the point where supply equals demand for a product – the equilibrium price is where the hypothetical supply and demand curves intersect” (Investopedia, 2013). It is important to understand supply and demand of a product in order to find equilibrium. In today’s market, consumers are usually weary about purchases of large items due to the fact there are many competitors competing for the same potential customers. Could you live without the internet, cell phone, microwave, television, or any other electric technologies? Law of Demand and Supply The world today have grown to rely heavily on technology, especially the cellular phones, in their daily activities. “The average U.S. household today owns at least 23 consumer electronic products” (Get Energy Active, 2011). As the technology in cell phones changes, consumers are eager to purchase the latest styles whether for practical uses or to be consider part of the “in crowd”. Suppliers uses this information in researching and to appropriately distribute the products and services by applying the laws of demand and supply. The law of demand is when “supply is held constant, an increase in demand leads to...
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...Market Equilibration Process Terry Martin ECO/561 April 22, 2014 Eric Hogan Market Equilibration Process Supply and demand is considered one of the most important factors of economics. According to www.ingimayne.com, supply and demand set the price and the amount of a good that will be produced. For instance, if the demand is high the price will less, but when the price is high the demand the demand will be less. In addition, demand is the quantity of a product or service desired by the buyer and supply is how much the market can actually offer. This is also called the supply relationship. In my paper I will explain how the coffee prices rose in 2011 due to the increase demand and reduced coffee supply. In 2010, coffee prices increased more than fifty percent causing the price of coffee to rise tremendously. The short supply of Arabic coffee bean varietals are used for many gourmet coffee, premium coffee, and specialty coffee. They are used by Starbuck’s, Community Coffee, and other major coffee roasters and retailers. With the increase in professionals the demand for premium coffee has increased as well. In Brazil, India, and China this trend is particularly noticeable, placing a huge demand on coffee beans. Starbucks controls about seventy percent of China’s market share in the coffee industry. However, green coffee beans decreased and the higher cost of coffee worked its way to grocery shelves and in coffee houses and cafes across the country as well as the United...
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...Demand and Supply for DVD rental Fernando Miller ECO/561 4 November 2014 Saeed Tabriz Demand and Supply for DVD rental Introduction Purpose/Objective Background: The purpose of this paper is to provide real world experience using DVD rental market as well as to conduct analysis with examples of Demand and Supply. Element to consider in this paper are the laws of demand and supply and determinant factors; economic efficient markets and surplus and shortage. Market Conditions: DVD rental are slowly becoming outdated as demand for this product dwindles. Attributing factors broad about a shift in the supply and demand conditions may be attributed by new technological developments (supply) that has introduce other mediums (demand preference) of providing this type of entertainment service. Demand for this type of product is currently fulfilled by businesses such as Amazon, Netflix and Redbox who currently host the biggest market share for this type of product. Law of demand and determinants: McConnell (2009) defines the Law of Demand as “Other things equal, as price falls, the quantity demanded rises, and as price rises, the quantity demanded falls.” This law establishes an inverse relationship between price and quantity demanded (McConnell 2009). Determinants of demand are consumer factors that shift the demand curve factors such as income (increases and decrease), preferences (consumer choices), and number of buyers (increase or decrease). Price...
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...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...
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...Market Equilibration Process Paper Economics ECO/561 March 18, 2015 Market Equilibration Process Paper In this paper I will describe the “Market Equilibration Process” which identifies the basic condition in which all of these economic forces are balanced. There are many variables that enable these forces to find this equilibration; the primary driver is supply and demand. The law of demand is when your customers purchase more of the goods as the price decreases and less as the price goes up. This is driven primarily through social trends, followed by price and personal choice. The law of supply is what is currently available to market, many producers will increase supply as demands increases. The efficient markets theory basically states that it is impossible to beat the market, as it is always within the means of all relevant information. All of these theories begin with surplus and shortage which occurs in all markets with all market goods. When there is a surplus the price comes down and opposite when there is a shortage the price will increase. In essence what the “Market Equilibration Process” theory suggests is that any product or service trends toward what the market is willing to pay based on demand and supply. I will apply this theory in home values and availability, because of high demand real estate has seen an increase in the price of most homes for sale especially when supply is low. In many communities throughout the State of California families have been...
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...Market Equilibration Process Paper The economic concepts that influence global business can be applicable even to everyday life. For business managers is essential to be aware of laws of demand, supply, and equilibrium to grow their business. Examples of the mentioned laws are abundant in the daily ground, and by recognizing and exploring them people can learn by observations. The author will discuss the market equilibration process based on example that everyone can relate to – food. Law of demand Demand is how much consumers are willing to pay for a good or service in particular period. The demand relationship is showing the interdependence between quantity and price. For instance, if the cost for exotic fruits is relatively low, consumers will be willing to purchase more kilograms. On the contrary, side if fruits that are imported in the country are expensive, the buyers are likely to buy just a few as for the remaining sum they will fill in their basket with local fruits. The inverse relationship between demanded quantity and price is defined by McConnell, Brue, and Flynn (2009) as law of demand; it is shown on graph 1. Graph 1. Relationship between demanded quantity and price Law of supply Supply is how much of a good or service the market can offer for a certain cost. The law of supply is the relationship between price and quantity supplied. The graph representing the law of demand has a downward slope. Opposed to it, graph 2 that shows the interdependency...
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...Clifford Thompson ECO/561 September 9, 2014 Dr. Virgil Mensah-Dartey When an organization is mention, the one of the first thing that comes to mind is the collective economic concepts of supply, demand determinants and market equilibrium in the marketplace. While this is true, one needs to consider the relationship between the buyer and the seller in the market. This paper will specifically examine the roles market equilibrium and how it compares to a consumer purchasing surrounding supply and demand of a product quantity (Kimmons, 2014). Law of Demand According to McConnell, market equilibrium is determined when establishing supply demand of product quantity and services. As a result, the equilibrium processes provide confidence for the buyer and the seller. One economic concept is demand. The demand curve that shows the estimated quantities amount the consumer is willing and able to pay for a product during at a specific price or during a specified period (McConnell, Flynn 2009). Demand is an important factor that shapes the behavior of the customer. A fundamental demand theory is when prices fall on an item the demand quantity increases. The law of demand is the relationship between the price of an item and the quantity demanded. An example could be the sale of television sales before the super bowl. Most department stores retail high definition televisions for $1100 normally; however, during the upcoming super bowl week, the televisions were reduced by 20...
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...Market Equilibration Process Paper The market equilibration provides opportunity for business organization to adapt to various changes that happens in the market in their field. To guide the management in adjusting to the demands by adjusting the supply to create market equilibrium. This will enable the producers and purchasers to be on the same par on price and products. Law of Demand For equilibrium to exist there must be a demand of the product or products or services. There must be willing buyers with available resources to purchase the products or services at the agreed price. Once the need has been established, the products can be produced or developed. Law of Supply The product is supplied to the market at the price the consumer is willing to pay, and this thus creates market equilibrium. In a situation in which there is an imbalance in one side, the equilibrium is affected, and there is a shift more to once side. In a situation of this nature there may be a shortage of supply and may cause price increase that may result in competitors coming in to fill the vacuum. The other possibilities are to have excess supply in the market, and this will drop the price of commodity that may cause a big drop in price and will create an imbalance in the equilibrium in the market. Efficient market Theory The efficiency of this theory depends on how effective the market supply respond to the demand and how the consumers perceived and received the products. Surplus and Shortage ...
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