Market Equilibrating Process Paper
Market equilibrium is the point in which industry offers goods at the price consumers will consume without creating a shortage or a surplus of goods. Shortages drive up the cost of goods while surpluses drive the cost of goods down, finding the balance in the process is market equilibrium. A good example of a market equilibrium commodity would be the price of gasoline. Currently a barrel of oil is around $81.00USD. This has resulted in an increase in the price of a gallon by about $1.00 from one year ago to an average of about $3.00 per gallon of gasoline. While driving habits have not started to change, people are taking notice and may be looking to make changes should priced continue to rise. The sector of the market that is taking notice and making a changes is those homes that use oil for heating. The recent cold snap in the mid-west and east has increased the need and usage of oil. The $1.00 increase in price per gallon of gas from a year ago is resulting in a larger percentage of increase in home heating. Consumers are starting to make changes in their live style in order to achieve a personal equilibrium in their budget. The dollar increase may not seem like much but the bottom line result is in increase of about 3% - 5% in homes heating costs. The reasons sighted for the increase in oil is increased consumption by China, colder than normal temperature is Europe and shortages in Europe due to their unseasonable amount of snow fall in the large cities.
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