Market Equilibration Process
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Market Equilibration Process Paper
Bryan Pelton
ECO/561
February 8, 2012
Michael Coffey
Market Equilibration Process Paper
In today’s market, consumers are generally weary about what purchases they make due to the fact that there are many competitors competing for the same potential customers. The market equilibration process is such that when goods are in short supply, buyers bid against one another in relation to its price which causes the price of the good to rise. This rise in price increase will eventually cause a drop in demand and will then cause the supply to increase following the law of supply. This pattern will continue until the quantity demanded is equal to the quantity supplied and the price suppliers want to supply the good at equals the price the buyers want to purchase the goods at (McConnell et al. 2009).
Consumers today have grown to rely on technology, specifically cellular phones, in their everyday life which is why they are a perfect example to illustrate market equilibration. As new technology in cell phones becomes available, consumers are generally eager to purchase the latest and greatest product whether it is for its practical uses or simply to be a part of the “in crowd”. With this being well known, suppliers have a great responsibility in researching and applying the laws of supply and demand to attempt to distribute their goods appropriately.
The law of demand states that consumers buy more of a good when its price decreases and less when its price increases. The law of supply states that at higher prices, producers are willing to offer more products for sale than at lower prices, that the supply increases as prices increase, and decreases as prices decrease, that those already in business will try to increase productions as a way of increasing profits. With that said, to achieve market equilibrium, new cell phones must be priced to establish competition such that the amount sought by buyers is equal to the amount...
Bryan Pelton
ECO/561
February 8, 2012
Michael Coffey
Market Equilibration Process Paper
In today’s market, consumers are generally weary about what purchases they make due to the fact that there are many competitors competing for the same potential customers. The market equilibration process is such that when goods are in short supply, buyers bid against one another in relation to its price which causes the price of the good to rise. This rise in price increase will eventually cause a drop in demand and will then cause the supply to increase following the law of supply. This pattern will continue until the quantity demanded is equal to the quantity supplied and the price suppliers want to supply the good at equals the price the buyers want to purchase the goods at (McConnell et al. 2009).
Consumers today have grown to rely on technology, specifically cellular phones, in their everyday life which is why they are a perfect example to illustrate market equilibration. As new technology in cell phones becomes available, consumers are generally eager to purchase the latest and greatest product whether it is for its practical uses or simply to be a part of the “in crowd”. With this being well known, suppliers have a great responsibility in researching and applying the laws of supply and demand to attempt to distribute their goods appropriately.
The law of demand states that consumers buy more of a good when its price decreases and less when its price increases. The law of supply states that at higher prices, producers are willing to offer more products for sale than at lower prices, that the supply increases as prices increase, and decreases as prices decrease, that those already in business will try to increase productions as a way of increasing profits. With that said, to achieve market equilibrium, new cell phones must be priced to establish competition such that the amount sought by buyers is equal to the amount...