...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 Equilibration Process Kumberly Milan ECO/561 July 13, 2015 Harry Dzakwasi Market Equilibration Process A market is a group of people that sell products to consumers who buy the products. Usually within a market some form of competition is presented and supply and demand must be considered. Demand is how much product or services a consumer is willing to purchase and supply is the labor or materials provided for the consumer to purchase ("Basic Economics ", 2007-2015). In relation to supply and demand some business owners efficient market theory to determine the rise of prices. According to Fama (2004-2015) “the efficient markets theory is a proposition that the prices of stocks, bonds, and other securities fully reflect all available information at any point in time” (Behind This Chicago Idea). With efficient markets theory business are allowed to increase prices of products and labor based on future predictions. If the business owners suspects any changes that will affect the equilibrium they can increase prices as needed. Business owners must make sure there is a balance or equilibrium between the supply of services as well as materials and the demand for these services and materials. If the business owners have a surplus of supplies they may find it difficult to sell all products or services and may have to lower prices of these products and services until they reach a state of equilibrium. If there is an excess of demand the business owner will find that...
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...During the week’s one and two lectures, we identified the importance of the market equilibrium for the business managers. Market is considered to be in the equilibration when the supply of a product or service is equal to the demand for that product or service. The main goal of every organization is to ensure the output is at the equilibrium, meaning there is no surplus or shortage. Business managers need to recognize how economic principles such as supply, demand, as well as the determents are a part of an ongoing business decisions. This paper examines how economic principles such as concepts of supply, demand, and market equilibrium and their relationships to real-world examples. Efficient market theory holds that the price of a particular product is determined by supply of the product and the demand as well as a consensus in the marketplace (Schroeder, Clark & Cathey, 2005). If the market is in the equilibrium, the price of a product will not change unless some external factor changes the supply or demand. In other words, the equilibrium price and quantity will change with the change in demand or supply. According to McConnell, Brue & Flynn, “other things equal, as the price falls, the quantity demanded rises, and as price rises, the quantity demanded falls. In short, there is a negative or inverse relation-ship between price and quantity demanded. Economists call this inverse relationship the law of demand.” (p. 47). In order to understand how this concept works, we can...
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...Market Equilibrium Process The importance of understanding the process between two equilibrium points due to changes within a business’ supply and demand of their product is key for any business to be successful. Business owners rely on their supply managers to make decisions and determine the best options based on the company’s fluxuating market. The opportunity costs also are associated with a managers overall decision in determining the supply and demand between two equilibrium points. “Markets bring together buyers (“demanders”) and sellers (suppliers”), and they exist in many forms” (McConnel, Brue, Flynn, 2009 Ch. 3). Therefore, if the demand curve is downsloping and the supply curve is upsloping where the two meet in the middle will be the equilibrium price between the demand and supply (McConnel, Brue, Flynn, 2009 Ch. 3). When either side fluxuates then it effects the other moving the equilibrium price, therefore, decreasing the risk of shortages and surpluses of a particular product. A perfect example of market equilibrium is the medical marijuana dispensaries; in the past few years states have legalized the selling of legal medical marijuana, most recently with Washington and Nevada. However, Clark County will be issuing 4 different types of licenses and business owners can apply for one of the four licenses. Clark County received over 200 applicants along with formal business plans and financial statements proving the applicants had the assest to operate either...
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...Market Equilibrium within the Oil Market Professor Uhimchuk Eco 100 November 3, 2013 In the article titled “Oil Market equilibrium fragile, says think tank”, the author speaks about the fragile state that oil prices are reaching and countries within Europe as well as the United States are looking for other means to produce oil rather than paying the high cost of oil barrels. By looking for alternatives to the traditional oil, the oil industries have been raising the price of the barrel to help compensate for the demand leveling out and not rising as it would normally. According to CGES “The world is increasingly burning fuels than oil to generate power, leaving transportation as the only area where there is still no large scale alternative to oil.” With the transportation industries still depending on traditional fuel supplies, the oil industry can depend on the consumers continuing demand for their source of oil. Leo Drollas who is the Chief Economist for CGES, talks about his interpretation of the equilibrium of oil among China, Europe and the United States. While Europe has steadied out and their demand for crude oil hasn’t risen nor has it fallen, China’s demand for it has continued to grow, but he also states that this doesn’t necessarily mean that they are having a growing demand for it, but that they could just be storing it for future use. The consumption and demand between these three powerhouses are “considered the catalysts for a global recovery.” (Drollas)...
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...Market Equilibration Paper Thomas Fowler ECO/561 June 2, 2014 Bobbie Murray Market Equilibration Paper Economic concepts are inaugural part of business management. This will help an individual to operate a business successfully and maximize profits while reducing costs. One of the economic concepts is market equilibrium. According to (McConnell, Brue, & Flynn, 2009), “The equilibrium price and quantity are established at the intersection of the supply and demand curves. The interaction of market demand and market supply adjusts the price to the point at which the quantities demanded and supplied are equal. This is the equilibrium price. The corresponding quantity is the equilibrium quantity. A change in either demand or supply changes the equilibrium price and quantity. Increases in demand raise both equilibrium price and equilibrium quantity; decreases in demand lower both equilibrium price and equilibrium quantity. Increases in supply lower equilibrium price and raise equilibrium quantity; decreases in supply raise equilibrium price and lower equilibrium quantity” (p.1). In the appendix #1, the apple market shows what consumers and farmers would purchase apples at $2.00 per bushel. The equilibrium price for the apples is $2.00 per bushel. If the market price is below the equilibrium price, consumers want to buy more than the equilibrium price and producers will produce less. Excess demand is created and causes a product shortage. This allows consumers...
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...Market Equilibrium Process Glenda M. Manayon University of Phoenix ECO 561 2 October 2012 Al Gourrier, MBA Market Equilibrium Process In a free market economy producers maximize profit by satisfying consumers demands while commodities that are available are determined by the budget constraints of its consumers. Market equilibrium is a significant part of a business’ success. The market determines equilibrium prices leaving business managers the task of determining business decisions while factoring in the law of supply and demand, and its economic principles for the financial success of the organization. This paper will discuss the following four concepts that are important in market equilibrium namely the law of supply, the law of demand, efficient markets theory, and supply and shortage using a conceptual “energy shot” product. One shot energy is an energy “shot” product that was recently launched by “X-energy Company” which has reached top sales because of it’s innovative way of boosting energy in a matter of seconds upon the consumption of a single shot. Energy products are not regulated by the FDA and therefore its effectiveness or side effects can only be tested and vouched for by consumers. One shot energy is sold at $3.00 in a 1.5 ounce bottle. The theory of market equilibrium states that there is a market balance when there is agreement in price and quanitity, unless an outside force disrupts the balance. One shot energy is...
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...Market Equilibrium Process Paper Author ECO/561 Instructor Date In today’s market finding the exact location of market equilibrium for any product offered is very hard. Economic troubles have forced many organizations to make decisions they attempted to avoid, but were left with no other choice. For furniture retailers, finding that balance of supply and demand has been very difficult in the last five years. Market equilibrium is where the supply of an item is exactly equal to its demand. Since there is neither surplus nor shortage in the market, price tends to remain stable (Business Dictionary.com, 2010). In a 2008 article by WalletPop.com, Tom Barlow claims that major furniture chains were sitting on a ton of unsold inventory, and buyers stood to find some real bargains. The closing of chains such as Sofa Express and Levitz would eventually lead the market back to equilibrium. And according to the Wall Street Journal, retail furniture sales in January 2008 were down 1.9% from 2007 and grew at less than half the expected rate in 2007 (Barlow, 2008) In the real estate fall out in California, many other industries faced hard times. The furniture industry was one of industries that felt the blow the hardest. Consumers were no longer purchasing home goods, and were facing hard financial hard times. Several determinants of demand and determinants of supply took affect on the furniture market. Number of buyers in the market, consumer income, and prices of other goods...
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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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...Market Equilibrium Understanding market equilibrium and how to maintain market equilibrium is essential for all business leaders. Market equilibrium is the point at which the demand of the consumers is equal to the supply of the producers. The goal of all organizations is to ensure their output is at market equilibrium, therefore having no surplus or shortage. However, many factors can affect a both demand and supply of a product. This paper will look at the factors which have caused a shortage of bacon and thus changed the market equilibrium. The law of demand states, that all other things being equal, as price falls the quantity demanded rises, and as price rises, the quantity demanded falls. Concurrently, the law of supply states that as price rises the quantity supplied rises, and as price falls, the quantity supplied falls. Additionally, the law or scarcity tells us that for any given period of time we have a finite or scarcity or resources to allocate our unlimited wants. What does this have to do with bacon? Scarcity. As we continue to utilize alternative resources for fuel, many car manufacturers have begun to use ethanol, which is derived from corn. Additionally, an abnormally hot summer has led to shortage of corn. These factors, along with others have led to a shortage of corn; which is used to feed pigs. Less feed for pigs results in smaller pigs. Thus, the shortage of corn has led to a shortage of bacon. A shortage in bacon supply has created a minor...
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...Market Equilibration Process Paper Economics 561UoP 10 October, 2014 There are many products that yield a high price on markets today. Next to oil, coffee is the world’s second most traded commodity. Sold in over 50 countries, the farmers who produce coffee are in the millions. Furthermore, there are over 100 million people involved in the growing, producing, trading and retailing of coffee, and over 15 billion pounds of coffee being produced yearly. From a bird’s eye view, the law of supply is working perfectly. Consumption however, is at 13 billion pounds a year. This dispersion in production is why the coffee industry is not the text book example of supply and demand. This dispersion is also the reason for price variations worldwide. The leading retailer of coffee worldwide is Starbucks. Once a small coffee shop in Seattle Washington, Starbucks now purchases, roasts and sells whole bean, brewed, espresso and cold blended coffees, not to mention food and non-food related items which cover their counters in each of the 8,700 retail stores in North America, Latin America and the Middle East as well as the Pacific Rim. This world wide spread of consumers helps Starbucks somewhat control supply and demand. Be as this may, other factors also influence the rise and fall of the supply and demand of coffee. The law of demand provides that as long as price of a product remains low, demand will remain high. Coffee however, seems to distort this fact. The...
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...May 20, 2013 Eco/561 Market Equilibration Process Paper When we are shopping for items we always want to make sure that we are getting the best deal for the money that we are spending. At the end of the day when making a major purchase that is going to have a major effect on my financial situation there are many things that I must consider, but more than anything I want to make sure that I am satisfied with my purchase. When both the supplier and consumer are satisfied with the price of the product, market equilibrium occurs. According to businessdictionary.com market equilibrium occurs when the supply of an item is exactly equal to its demand. Changes in the determinants of demand, such as consumer expectations can affect the equilibrium of a market. Supply determinants, such as producer expectations can cause a specific market to decrease or increase in supply, resulting in changes of equilibrium quantity. When market equilibrium occurs, both the buyer and seller get what they want. For example, when I was in the market to purchase a new vehicle there were a lot thins that I took into consideration. I previously purchased Kia spectra and put one hundred dollars down and just walked out the door with my new car. I was so excited about having my own car I didn’t really care or think about the specifics concerning my payments or my interest rates. This time around I wanted to make sure I was satisfied with my car purchase. I wanted a Volkswagen Jetta. After looking at...
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...Market Equilibration Process Market equilibrium can be accomplished when market price established through competition so the amount of goods bought is equal to the amount of goods sold. Supply and demand would be factors to change the market equilibrium. In the oil industry market equilibrium is determined by the cost of oil, competitor’s prices, and technology. This paper will show the law of demand and the determinants of demand, the law of supply and the determinants of supply, efficient markets theories, and surplus and shortage. “As price falls, the quantity demanded rises, and as price rises, the quantity demanded falls” (McConnell, Brue, & Flynn, 2009, p. 47). Consumers travel constantly to go to work, school, or vacation. This travel requires the use of some form of transportation whether it is train, airplane, or automobile. The transportation modes all use a form of fuel to move the vehicles. Certain periods of time increase the demand for fuel or decrease the demand, for example holiday weekends would increase the demand. When the price of fuel increases a traveler will see an increase in an airline ticket or a train ticket. If the prices for the airline or train ticket are too much the traveler may choose to drive instead to keep their costs down. When the fuel prices raise so does the commuter train tickets, causing some commuters to find alternate ways to work such as carpooling. As the fuel prices decrease so do transportation costs allowing individuals to...
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...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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