Market Equilibrium Process Analysis
The main goal of the market equilibrium is to get match the common intention of buyer and seller in the market. According to McConnell, the market equilibrium is the base point in which the supply and demand of the product quantity (McConnell, 2009). The equilibrium process play role for the buyer and seller agreement and confidence in each other.
The process of equilibrium has impact of the following facts
- Equilibrium price and quantity of products
- Changes and shift in demands of the products
- Changes and shift in supply of the products
Order custom essay Market Equilibrium Process Analysis with free plagiarism report
450+ experts on 30 subjects
Starting from 3 hours delivery
The equilibrium price and quantity also can be referred by the total intersection of supply and demand curve. The shift in this curve will affect the shift in the equilibrium price and quantity. The change in the demand of product also effect the price and quantity structure at equilibrium because if the demand is higher then the price will be higher and the production in quantity will be higher as well. The supply will have impact on the equilibrium level as well because if the product supply in large amount then the price will stay at the low but if the supply level decreases then the price might go up due to the demand of the product.
Above all facts about the market equilibrium process can be shown in the experience at the music store while buying music CD. One of the favorite band CD price was $15 until previous week, but at present the price have gone up to $22. The sudden price change was the effect of the demand of the band CD. The change in demand of the CD was higher this week and the supply was only 50 in quantity, which producer thought to be enough for the market demand. But the same CD was requested by more than 50 people, and increase in the demand prompt to increase in the price.
Thus the effect of the demand change affected the equilibrium structure of price and quantity. The same effect can be seen in the supply. The supply of the same band CD was 70 and only 50 people have requested about the band CD on the price of $15. It shows that the 50 people are fine with the product and they are not planning to buy more same band CDs. Therefore, the price of the CD dropped to $10 in order to produce cell of remainder 20 CD in supply. The shift in the supply caused the equilibrium to reach lower for both price and quantities. Thus the supply and demand have major impact on the equilibrium price and quantity.
These three factors would explain that the market equilibrium process can be achieved in the theory but in the real-world market with constantly changing price and economy would make it harder to achieve market equilibrium. Thus, the factors of supply and demand have affected the market equilibrium process including the equilibrium price and quantity. The change in supply and demand impacts largely on the market equilibrium and bring level of equilibrium higher or lower.
Reference:
- McConnell, C. R. , Brue, S. L. , & Flynn, S. M. (2009).
- Economics: Principles, problems, and policies (18th ed. ). New York: McGraw Hill/Irwin.
Cite this Page
Market Equilibrium Process Analysis. (2018, Jan 30). Retrieved from https://phdessay.com/market-equilibrium-process-analysis/
Run a free check or have your essay done for you
