Eco/561 Week 2 Individual Paper

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Week 2 Individual Paper
Anthony Dulle,
ECO/561
January 10, 2013
Mark Pribonic

Week 2 Individual Paper
As discussed in week 1; understanding market equilibrium and how to maintain market equilibrium is essential for all business leaders. Market equilibrium is the point at which the demand of the consumers is equal to the supply of the producers. The goal of all organizations is to ensure their output is at market equilibrium, therefore having no surplus or shortage. However, many factors can affect a both demand and supply of a product. This paper will look at the factors which have caused a shortage of bacon and thus changed the market equilibrium.

The law of demand states, that all other things being equal, as price falls the quantity demanded rises, and as price rises, the quantity demanded falls. Concurrently, the law of supply states that as price rises the quantity supplied rises, and as price falls, the quantity supplied falls. Additionally, the law or scarcity tells us that for any given period of time we have a finite or scarcity or resources to allocate our unlimited wants. What does this have to do with bacon? Scarcity. As we continue to utilize alternative resources for fuel, many car manufacturers have begun to use ethanol, which is derived from corn. Additionally, an abnormally hot summer has led to shortage of corn. These factors, along with others have led to a shortage of corn; which is used to feed pigs. Less feed for pigs results in smaller pigs. Thus, the shortage of corn has led to a shortage of bacon. A shortage in bacon supply has created a minor panic among consumers, which has created an increase in demand with a decrease in supply. Based on the Market Equilibrating Process, we know that a supply decrease coupled with a demand increase create an increase in price. The combined effect is an increase in market equilibrium; which is greater than the effect of either changing separately.

In conclusion, pork...
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