February 28, 2013
Market Equilibrating Process Paper
A market’s equilibrium is much like that of the equilibrium that the everyday person strives to achieve in his or her daily lives. Equilibrium is evident when a person is transitioning from one job to another or even when re-entering the workforce after extended unemployment. A new job provides the opportunity for new luxuries and the possibility for a better life, but in the event of a job loss one may experience a need to cut back until finances have improved and balance out. Recently many people have experienced a form of disequilibrium due to the poor job market. Many people have been reduced to collecting credit card debt, bankruptcy, and losing their homes to foreclosure. Housing Market Equilibrium
The supply and demand of the housing market is one that is not often understood by the public. As little as a decade ago, house prices were increasing at such an extravagant rate that the demand far out-weighed the supply. Housing construction boomed and investors were able to get easy loans and many people began “flipping” properties with the hope that the housing market would continue to thrive. Just as everyone thought that everything was good, the market crashed and home values drastically decreased. Once homes were losing value the interest in purchasing decreased as well. This prompted the decrease in prices for new homes with the hopes of enticing people to purchase. Almost immediately, there was an inundation of short sales and foreclosures. Renting a property became more affordable to the general public who were finding themselves with a tighter income due to the changing economy.
Supply is defined as the quantity of a product that a producer is willing and able to supply onto the market at a given price in a given time period. The Law of Supply states that all things being equal, as the price...