Market Equilibrium Process Essay

896 words - 4 pages

Market Equilibrium Process
Nefertiti McDonald
Eco 561
Professor Somerset

In today’s economic culture, there is currently a huge significance in being able to analyze or understand the state of the economy to which we live in. Being that I spend money in today’s market I would like to think that the economic market is stable enough to return back to me in one form or another. One could always tell when a market is at its weakest of points. There are grave numbers of job loss or retention of employees, gas prices continuously rise, financial corruption are more present and recognizable. All of these things play a key role of individuals encountering equilibrium.
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This is very similar to market process as it further proves pricing to be efficient because there is neither an excess of supply and wasted output, nor a shortage – the market will close evenly with no gains or losses on either side. This is also a central feature of the price mechanism, and one of its significant benefits.
The establishment of equilibrium
If you were to put supply and demand on a graph it could be argued that if demand was seen contracting inwards along the curve that supply would exceed demand. Also if demand were to extends outwards along the curve that demand would exceed supply. Both of these changes are called movements along the demand or supply curve in response to a price change. Demand contracts at higher prices and will eventually discourage consumers not to further require the goods or services. When demand extends the curve at lower prices the change in pricing will elevate the current demand.

Supply is quite different then the rule for how expectations are met on both the parts of the consumer and the supplier. When prices tend to escalate or are outside of the curve, the need for replenishing supply shall always be greater than the demand. A supplier is looking at the terms of increased revenue, and profits which propels the opportunity cost to be lowered as a result of supplying more good or services. “Lower prices discourage supply because of the increased opportunity cost of supplying more. The opportunity cost of supply relates to the possible alternative of the factors of production. (Economics Online)
The principles of economics help us understand how it is that economies of society and...

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