Market Equilibration Process
Market Equilibration Process
The United States of America is essentially a free market economy, because it is facilitated by supply and demand within our society. Although, America is essentially a free market there is still some government regulations put in place to guarantee fair practices. A true free market would mean that buyers and sellers would conduct their business without any government regulations.
A free market that we all see and experience is the automaker market. Numerous automakers are in constant competition to ensure that their product is outperforming the other products on the market. The automakers industry is facilitated by supply and demand. For example when we saw automobiles featuring things such as, the rearview camera, blind spot check, and so on, initially in the luxury cars. Now all automakers have ...view middle of the document...
The law of demand states that if all other factors are equal, the price value of a good or service increases. Consumer demand for a commodity will decrease and the same will be true of the opposite. The law of demand states that as the price for a commodity rises the lower the quantity of demand because of the opportunity consumers have to acquire that commodity increases. More tradeoffs will be made in order to obtain the more expensive commodity. The determinants of demand looks at all factors that determine the quantity of demand pertaining to a particular commodity, so we look at Americans and their love of their vehicles.
The Efficient Market Theory would suggest that automakers would have been able to foresee the demand in fuel efficient vehicles before the demand hit them. The Efficient Market Theory is somewhat of a discredited theory, because there is no way to beat the market. With the shift in consumer behaviors and demands this created a need for a shift between two equilibrium states. Consumers are demanding more fuel efficient vehicles, therefore causing automakers to meet the demands of the consumer.
World events, such as oil and fuel prices rising and the increasing demand for fuel efficient automobiles, ultimately changes consumer behavior and demands. With the changes in consumer behavior and the increased demands this ultimately altered the supply and instigated a movement between two equilibrium states.
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