Market_Equilibrating_Process

Market Equilibrating Process Market Equilibrating Process Market equilibrium instills a similar concept of mine of when your body reaches hemostasis; a point when all parts in the body are coordinating a universal stability. The force that moves this stability into equilibrium is the same for the market equilibrium. A point on a graph when the quantity demanded and quantity supply intersects and is balanced. Factors related to price equilibrium are of the following: Demand is a schedule or a curve that shows the various amounts of a product those consumers are willing and able to purchase at each of a series of possible prices during a specified period of time. Demand shows the quantities of a product that will be purchased at various possible prices, other things equal (McConnell, Brue, and Flynn 2009). I was in an industry for 25 years selling to retail stores in Southwest. An example of this is using a price of a dress retailing around $100.00. When the retail store wants to generate revenue, the retailers put dresses on sale for 40% off. With this reduced price, a shift in quantity demand occurs by having more consumers come into the store to purchase a dress. As the price is lowered with dresses, you notice an inverse relationship between price and quantity, meaning the less dress cost for the consumer the more of a quantity the store will sell of them. This is called the Law of Demand. The next concept is supply. By using the above dress example, when the prices decrease, dress manufactures make fewer dresses. There will be less revenue for these products. However, when prices increase, manufacturing increases. This positive relationship between price and quantity is called the law of supply. When prices fall, dictates the amounts of a product that producers are willing and able to make available for sale at each of a series of possible prices during a specific period. A supply schedule tells us that, other things equal, firms will produce and offer for sale more of their product at a high price than at a low price. (McConnell, Brue, Flynn 2009). There is a difference between quantity demanded when the price changed in the above example and a demand shift. This occurs when other factors occur such as; the town population unexpectedly changes, income (customers willing to pay) or the tastes and preferences shifted. A shift to the right means an increase in demand on the curve. This would occur when the town population or income increases. The opposite occurs when there is a decrease in these factors. Let use an example of new dress store in town which increases the supply of dresses within the town. The equilibrium price will shift lower because supply will exceed demand creating a surplus. If the opposite occurs and the competition closes out, there would be an excess in demand of dresses creating a shortage. This happened with the graze of Beanie Babies in the nineties. They were in such high of demand that there was a shortage of supply. But after a year, the demand of these toys were in decline, so a surplus ensued consequently reducing the prices of these items. In conclusion, many factors influence the change of shifts for demand and supply. Equilibrium helps maximize both the quantity demanded and supplied within the marketplace. References McConnell, Brue, and Flynn (2009). Economics: Principals, Problems and Policies. 12th edition. New York: McGraw-Hill, ISDN 978-0-07-337569-4 (Pages 50 and 52)