Market Equilibrium Process Paper
Market Equilibrium Process Paper
Ronald S. Albergo
ECO 561
2/11/2013
Kevin McKinley
Introduction
Understanding how market equilibrium is maintained is essential for business managers. As a manager, it is important to consider how economic principles, and specifically supply and demand, are as a part of everyday business decisions. In the following paragraphs there will be a description of the economic concepts of supply, demand, and market equilibrium and discuss their relationship to real world examples.
Demand
According to McConnell, Brue and Flynn (2009) “demand is a schedule or a curve that shows the various amount of a product that consumers are willing and able to purchase at each of series of possible prices during a specific period of time” (McConnell, Brue, & Flynn, 2009, p. 46). The inverse relationship between price and quality demanded is the quantities of a product that will be purchased at various possible prices (McConnell, Brue, & Flynn, 2009). An important concept of demand is when price decreases, the quantity demand increases and when the price increases, the quantity demand decreases. Determinants of demand are consumers’ tastes (preferences), the number of buyers in the market, consumers’ income, the prices of related goods, and consumer expectations.
For example to show how the law of demand works we will use the sale of school supplies. A well-known superstore retails school supplies such as notebook paper for $2.99 and pencils for $1.29. At their back-to-school sale their prices for notebook paper drops for $1.00 and for pencils $.29. As the prices went down, more consumers’ purchased school supplies. The superstore is a strong believer in the law of demand concept.
Supply
“Supply is a schedule or curve that shows the various amounts of a product that producer are willing and able to make available for sale at each of a series of possible prices during a specific period” (McConnell, Brue, & Flynn, 2009). As
Ronald S. Albergo
ECO 561
2/11/2013
Kevin McKinley
Introduction
Understanding how market equilibrium is maintained is essential for business managers. As a manager, it is important to consider how economic principles, and specifically supply and demand, are as a part of everyday business decisions. In the following paragraphs there will be a description of the economic concepts of supply, demand, and market equilibrium and discuss their relationship to real world examples.
Demand
According to McConnell, Brue and Flynn (2009) “demand is a schedule or a curve that shows the various amount of a product that consumers are willing and able to purchase at each of series of possible prices during a specific period of time” (McConnell, Brue, & Flynn, 2009, p. 46). The inverse relationship between price and quality demanded is the quantities of a product that will be purchased at various possible prices (McConnell, Brue, & Flynn, 2009). An important concept of demand is when price decreases, the quantity demand increases and when the price increases, the quantity demand decreases. Determinants of demand are consumers’ tastes (preferences), the number of buyers in the market, consumers’ income, the prices of related goods, and consumer expectations.
For example to show how the law of demand works we will use the sale of school supplies. A well-known superstore retails school supplies such as notebook paper for $2.99 and pencils for $1.29. At their back-to-school sale their prices for notebook paper drops for $1.00 and for pencils $.29. As the prices went down, more consumers’ purchased school supplies. The superstore is a strong believer in the law of demand concept.
Supply
“Supply is a schedule or curve that shows the various amounts of a product that producer are willing and able to make available for sale at each of a series of possible prices during a specific period” (McConnell, Brue, & Flynn, 2009). As
References: McConnell, C. R., Brue, S.L., & Flynn, S.M. (2009). Economics: Principles, problems, and policies (18th ed.). New York: McGraw Hill/Irwin.