Understanding the concept of supply and demand greatly benefits a business’s or household’s ability to optimize their earnings. Market Equilibrating Process is “the interaction of market demand and market supply adjusts the price to the point at which the quantities demanded and supplied are equal”, known as equilibrium price. The corresponding quantity is the equilibrium quantity. A change in either demand or supply changes the equilibrium price and quantity (McConnell, Brue, & Flynn, 2009). My experience with the market equilibrating process is easily found in my personal financial debts and income. If we consider my income the supply curve and my debts and expenses the demand curve, then the point where my income equals my debts is the equilibrium point. The equilibrium point would represent the dollar amount I could afford my debts or breakeven point. As I have learned, many factors can affect supply or demand curve, which in turn affects the equilibrium price and quantity. The most detrimental to my balance in income and expenses are the introduction of credit cards or loans. Loans and credit cards make it possible to purchase items that are currently out of reach to pay in full at the moment to more attainable monthly payments within the equilibrium point. But should the supply of income diminish or be lost, the demand of debts and expenses would be out of range for me to afford. My choice to open loans is a gamble against the odds that I will not lose my supply of monthly income. The longer time it takes to pay the loan the higher the risk that my income may change. Ideally having enough money to purchase what I want without taking out loans would be the best situation. However my desires to have, exceeds what I can afford. So like many others I have taken that risk.
McConnell, C. R., Brue, S. L., & Flynn, S. M. (2009). Economics: Principles, Problems, and Policies. New York, NY: McGraw-Hill/Irwin.