...Market Equilibrium Process Marlana Sisson Economics Maria Hamideh Ramjerdi April 13, 2014 The basis of any economy is supply and demand. Consumers have a need, or demand, for goods and services. Producers produce and supply those goods and services to the consumers in the marketplace of the economy. Producers must find the right price to sell their goods and must also produce the quantity demanded by consumers. If producers produce too much or too little of a product, the will create a shortage or surplus in the market. A shortage occurs when producers do not produce enough of a good or service to meet consumer demand. A surplus occurs when producers produce too much of a good or service in excess of consumer demand (Ehrenberg & Smith, 2003). Country XYZ is the leading exporter for coffee beans in the world. Recently, their government has undergone some reform and has placed an embargo on the country’s coffee beans export. If all other remain constant, the law of demand suggests that an increase in price will result in a decrease in demand for the product (McConnell, Brue & Flynn, 2009). County XYZ was producing at market equilibrium at point ME (shown in Diagram A). Now that an embargo has been placed on coffee beans, they will become more expensive to export. This increase causes the producers of the coffee beans to raise their price from the initial price, P, to the new price, P’, and the supply to shift from SS to SS’ as shown in Diagram A. This new...
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...Market equilibrium is a circumstance in which the quantity of merchandise or services demanded by consumers is equivalent to the quantity supplied by sellers (McConnell, Brue, & Flynn, 2009). The purpose for this paper is to relate the concept of the market equilibrating process to a previous real-world occurrence happening in a free market. The market equilibrating process will be clarified and the following components will be considered in the clarification; law of demand and determinants of demand, law of supply and determinants of supply, efficient markets theory, and the surplus and shortage. Law of demand and determinants of demand Demand is a schedule or a curve that illustrates the assorted quantity of a product that consumers are willing and able to acquire at each of a sequence of probable costs during a specific period (McConnell, Brue, & Flynn, 2009). As price falls, the quantity demanded ascends and as the price rises, the quantity demanded drop. The affiliation among the price and quantity demanded is labeled an inverse affiliation and this Economist call the law of demand. The determinants are the -other things equal- consumers’ preferences, the number of consumers in the market, buyers’ income, the cost of similar goods, and buyer expectations. An example could be the sale of Jordan sneakers. The manager of a chief department store retails Jordan’s for $120 usually, but during their back-to-school sale, the Jordan’s were reduced by 20% making them $96...
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...Market Equilibration Process Jeremiah D. Wood ECO/561 April 19, 2014 Professor John Lindvall Market Equilibration Process Economic equilibrium is defined as a condition or state in which the economic forces are at a balance. In this particular discussion, one will discuss equilibration, the process of moving between two different points that is affected by a change in demand or supply. One will cover how a specific world event, Hurricane Katrina, caused home prices in Baton Rouge, Louisiana to fluctuate between two equilibrium states. Also to be covered is how the process of said movement occurred using the behaviors of both supply firms and consumers. In the late summer of 2005, Hurricane Katrina bared down on the City of New Orleans and the surrounding areas. This storm caused a surge that caused the storm levees to break that in turn, flooded the City of New Orleans and took most of the city’s housing with it. Because of the destruction, about two hundred and fifty thousand people were relocated to nearby Baton Rouge, making it the largest city in Louisiana. Let us start the discussion by stating that the average price of a single-family home in Baton Rouge before Katrina was one hundred thirty thousand dollars, shown by point A on the graph (O'Sullivan & Sheffrin, 2002). With the explosion of the population, the average price jumped to one hundred and fifty six thousand dollars within six months, point B, and the market shrunk from three thousand six...
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...Market Equilibrium Process Paper ECO/561 January 15, 2013 Paul Andoh Market Equilibrium Process Market equilibrium process is defined as the matching process of supply and demand of the consumers. The law of demand is simply the pricing of items as it relates to the demand of item. McConnell, Brue, & Flynn (2009), “states that consumers preferences along with marketing of goods; expectation of consumers; level of income from consumers purchasing products; and cost of goods determines how the level of demand will be affected” (Chapter 3). Consumers are drawn to items for many reasons (i.e., looks, style, and latest design) however; the items may or may not be readily available. For instance, during the holidays many consumers searched for the latest and greatest game devices and other electronic devices. But what we have discovered is that during that specific time of year, the demand for such items are extremely high and he supply of demand seems to fall short. When an individual is seeking a specific item that cannot be found in stores, the internet is the next big source to finding what cannot be kept on shelves in stores. In most cases the prices online may be higher because of shipping but consumers find that it is a price they are willing to pay for peace of mind and to have the product of demand at the time. When a consumers desire to purchase a product that is not readily...
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...Market Equilibrating Process Janica A. Francis ECO/561 May 6, 2013 George Sharghi, Professor There are three players in the market equilibrating process, the Sellers, the Market and the Buyers. The Sellers are the makers, the producers of a product. The Market is the enabler, as it provides venues for the seller’s products to be view and sold by the buyers, the most important player. The Buyers, also known as the consumers, purchase the products marketed in the market at a price that is agreeable to all parties. Competition amongst the seller and buyers initiates the equilibrating process without either participation; the equilibrium process cannot be triggered. The Market Equilibrating Process The business dictionary defines market equilibrium as the current place in which an items supply matches the items demand (Business Dictionary, 2013). Since there is neither surplus nor shortage in the market, price tends to remain stable in this situation. The market equilibrating process is the procedure that suppliers use to reach equilibrium by maintaining a balance between supply and demand. McConnell defines supply is the schedule of quantities of a good and service that people are willing and able to sell at various prices and demanded is the quantities of a product that will be purchased at various possible prices (McConnell, 2009). The consumer’s demand of a service or good and seller’s...
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...Marketing Equilibrium Process Tracey Wilson ECO/561 January 14, 2013 Paul Palley Marketing Equilibrium Process The market equilibrium process is the manufactures ability to maintain a balance between supply and demand. The manufactures has strategically taken into consideration during their planning process how to maximize profits while maintaining the units needed to meet the cost that the consumer will pay above an item at a specific moment in time. In layman term, the market equilibrium process clarifies what happens when the consumers and sellers make decisions in a proficient market (McConnell, Brue, & Flynn, 2009). Therefore, it is important to understand economics, which is the study of scarce resources as it relates to human wants and how this process relates to making choices. The purpose of this paper is to describe the market equilibrium process as it relates to five basic economic concepts. The primary problem of economics entails that individuals must make choices among completing alternatives. Scarcity can never be eliminated, one must choose. “Scarce economic resources mean limited goods and services. Scarcity restricts options and demands choices” (McConnell, Brue, & Flynn, 2009). In life one must make choices, such as an individual’s decision to study an extra hour rather than going to dinner with a friend; therefore, the marginal benefit of studying exceeds its marginal cost. This is also a prime example of opportunity cost. Opportunity...
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...Market Equilibrating Process ECO/561 - Economics , Instructor This paper will explore the market equilibrating process and relate this process to a personal experience that has occurred in my life. According to the assigned reading, the equilibrium price for a product is the price at which the demand and supply curves intersect. In competitive markets, prices that are higher than the equilibrium price will result in a surplus and the market price will fall. When the market price is lower than the equilibrium price, a shortage will exist and the market price will rise. The equilibrium price is stable under existing demand and supply conditions. At equilibrium, no tendency for price to change is expected. Changes in supply or demand will cause predictable changes in both the equilibrium price and quantity. (McConnell, Brue, & Flynn,2009). To find market equilibrium, the two curves are combined on one graph. The place of meeting point of supply and demand indicates the equilibrium point. Unless interfered with, the market will remain at this quantity and price. At the point of connection, sellers and buyers see eye to eye on the quantity and price. Relating this process to my personal life experience, I look at the housing marketing. I worked for five years as a licensed Real Estate Agent. When I started in the business, it was booming. It was definitely a seller’s market. The demand was high for mega houses, condominiums and investment properties...
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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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...Market Equilibration Process Paper Adekola Ayantola ECO/561 November19, 2012 Market Equilibration Process Paper Market equilibration process in economics is the ability put the supply function and demand function together to obtain market equilibrium. The Demand and supply principle find the price and the output of the item in question. In a situation in which the supply quantity is fixed and assigned the evaluated function of the demand at that particular price will determine the supply price. 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, and this will enable the producers and purchasers to be on the same par on price and products. 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. 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...
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...THE MARKET EQUILIBRATING PROCESS The market equilibrating process is the technique in which producers use to maintain a balance between supply and demand reaching equilibrium. The methods that these producers have deliberated on, while preparing techniques, patterns and strategies which will lead to a maximization of profits as the units sold mirrors the amount that customers are prepared to pay for an item at any given time. This process and variables taken into consideration is the process on the way to equilibrium ("What Is Market Equilibrating Process"). This process is also referred to as a circumstance where the supply of a product is precisely equivalent to its demand. As a result, the price remains steady in this situation as there is no surplus or shortage is reflected in the market. The market has reached equilibrium as the supply and demand curves interconnect. At this point, quantity supplied and the quantity that is demanded is equivalent. Surplus and shortages are detected if the market price is higher than the equilibrium price and the quantity supplied is greater than quantity demanded therefore creating a surplus then the market price will fall. For example, retailers often have surplus of inventory that cannot sell therefore the prices are reduced and placed on sale. Since the price has decreased, the product’s quantity demanded will increase until equilibrium is obtained and as a result, surplus drives price down. Also, if the market price...
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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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...Market Equilibrating Process ECO561 March 17, 2011 Dr. Anyalezu Market Equilibrating Process In determining the number of goods or services demanded by the consumer and the goods or services supplied, business owners will be able to pen point the market price of his or her own products. Therefore, the understanding of supply and demand is important before deciding the equilibrium. With the quantity demanded and supplied as equal, the sales price is known as the equilibrium price (McConnell, 2009). When looking at equilibrium quantity there are two parts that have to be taken into consideration in a competitive market; quantity demanded and quantity supplied (McConnell, 2009). Combining the two will yield the market equilibrating process in a specific market and balance the supply and demand. For instance with release of Play Station 3, Sony was the monopoly and could sell their product at any price as wanted. That year, the XBOX 360 and Nintendo Wii released with the ability of virtual reality and exceptional graphics that forced Sony to develop another strategy. Play Stations were not selling and the market equilibrating process began to show its affects. Sony had more supply than demand and eventually had to drop their price to stay competitive. In addition, the price of a product and household income plays a major determinant that can affect the equilibrium price (McConnell, 2009). From personal experience, waiting until the...
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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 equilibrium is the point in which industry offers goods at the price consumers will consume without creating a shortage or a surplus of goods. Shortages drive up the cost of goods while surpluses drive the cost of goods down, finding the balance in the process is market equilibrium. In today’s economic environment there are varying array of contributors affecting market equilibrium. Some of these contributing factors are the ever changing technology, changes in supplies, and the change in consumer preferences. Any shift in these factors will affect the economic market, which will cause changes in various areas, thus resulting in significant shift in market equilibrium (McConnell, Brue, & Flynn, 2009). Reaching market equilibrium means being able to satisfy both the buyers and sellers, and on a graph, it reflect the intersection of demand and supply. Keeping the consumer satisfied in the long-term is a challenge. In the current economic environment, businesses are ensuring the resources are used proficiently and successfully, this is done through periodic assessments to ensure the company can benefit from the consumers and their changing preferences. This process would generate a precise pattern of the customer’s choices such as taste, technological alternatives, and amount of available resources, which would become outdated and ineffective (McConnell et al., 2009). My experience with the market equilibrating process is easily found in my personal financial debts and...
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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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