Market Equilibrating Process
Market Equilibrating Process
Tracey Bradley Sr.
ECO561
March 27, 2013
Robert D'Alessio
Market Equilibrating Process
Possessing an understanding of how market equilibrium is maintained is essential for one who desires to become a business manager. As a business manager, it is important to understand how economic principles, and specifically supply and demand, are a part of one’s everyday business decisions. Relating these concepts of the market equilibrating process to ones prior experiences in a free market should be discussed. One must consider the law of demand, the determinants of demand, the law of supply, the determinants of supply, the efficient markets theory, surplus, and shortage.
Market Equilibrium Market Equilibrium is the mechanism used to adapt to changes in the market place while adjusting supply and/or demand to meet at a place where the willing buyers and the willing sellers are matched at a price and quantity that satisfies both groups. One can classify this as the condition where a market price is established through competition such that the amount of goods or services sought by buyers is equal to the amount of goods or services produced by sellers. This price is often called the equilibrium price or market clearing price and will tend not to change unless demand or supply change.
Law of Demand
The Law of Demand is a microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer demand for the good or service will decrease and vice versa (INVESTOPEDIA, 2013).
There are three main assumptions of the Law of Demand: There should not be any change in the tastes of the consumers for goods, the purchasing power of the typical consumer must remain constant, and the price of all other commodities should not vary.
Law of Supply
The Law of Supply is a microeconomic law that states, all other factors being equal, as the price of a good or service increases, the quantity of goods
Tracey Bradley Sr.
ECO561
March 27, 2013
Robert D'Alessio
Market Equilibrating Process
Possessing an understanding of how market equilibrium is maintained is essential for one who desires to become a business manager. As a business manager, it is important to understand how economic principles, and specifically supply and demand, are a part of one’s everyday business decisions. Relating these concepts of the market equilibrating process to ones prior experiences in a free market should be discussed. One must consider the law of demand, the determinants of demand, the law of supply, the determinants of supply, the efficient markets theory, surplus, and shortage.
Market Equilibrium Market Equilibrium is the mechanism used to adapt to changes in the market place while adjusting supply and/or demand to meet at a place where the willing buyers and the willing sellers are matched at a price and quantity that satisfies both groups. One can classify this as the condition where a market price is established through competition such that the amount of goods or services sought by buyers is equal to the amount of goods or services produced by sellers. This price is often called the equilibrium price or market clearing price and will tend not to change unless demand or supply change.
Law of Demand
The Law of Demand is a microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer demand for the good or service will decrease and vice versa (INVESTOPEDIA, 2013).
There are three main assumptions of the Law of Demand: There should not be any change in the tastes of the consumers for goods, the purchasing power of the typical consumer must remain constant, and the price of all other commodities should not vary.
Law of Supply
The Law of Supply is a microeconomic law that states, all other factors being equal, as the price of a good or service increases, the quantity of goods