Competition

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  • Topic: Supply and demand, Economic equilibrium, Partial equilibrium
  • Pages : 2 (421 words )
  • Download(s) : 26
  • Published : April 13, 2013
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The buyers as well as sellers competition initiates the equilibrating process. Hence without the buyer seller competition, the equilibrium process cannot be triggered. In this paper, I will discuss the market equilibrating process and its real life occurrence. Sometimes, goods are in short supply and buyers bid against one another in relation to the price. This in effect drives up the price of the good triggering a fall in demand at some point. As a result of the initial increase in price, supply increases in accordance with the law of supply. Ideally, this process 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 good (McConnell et al. 2009). The example of market equilibrating that I thought of is the purchasing of Air Jordan sneakers. Every few months Nike introduces a new or different style of Air Jordan sneaker. When they do this one can truly see the effects of supply and demand in its full effect. In classical economic theory, the relation between these two factors determines the price of a commodity. This relationship is thought to be the driving force in a free market. As demand for an item increases, prices rise. When manufacturers respond to the price increase by producing a larger supply of that item, this increases competition and drives the price down. Modern economic theory proposes that many other factors affect price, including government regulations, monopolies, and modern techniques of marketing and advertising ("Supply And Demand", 2005).

The supply and demand curves intersect at the point where quantity supplied = quantity demanded. This intersection is what we call an equilibrium price. This is the price where the intentions of both the buyer and seller are compatible: Buyers want to buy the exact amount the sellers want to sell. Taking a look at the chart shows that the sneakers market equilibrium is met...
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