Market Equilibration Paper

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  • Topic: Supply and demand, Economic equilibrium, Partial equilibrium
  • Pages : 4 (1246 words )
  • Download(s) : 134
  • Published : August 7, 2012
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Market Equilibration Paper
Nicole Horne Numa
ECO561
August 5, 2012
Dr. Kathleen Byrne

Market Equilibration
The understanding and maintenance of the market equilibration process is necessary for a business manager. It is also necessary for the business manager to also understand the supply and demand principles. Supply and demand principles serve as a useful model for business manager’s to analyze the competitive market. It also illustrates how buyers and sellers interact in various business situations. Buyers and sellers will come to a point where they both agree on price and quantity. When this occurs, the point of intersection of supply and demand creates the point of equilibrium. The point of equilibrium can also be called the efficient markets theory. The efficient market theory explains how the equilibrium price is the price where the quantity demanded matches the quantity supplied. A business manager can determine how the markets react to the prices of the supplied product, by matching or combining the supply and demand curves. The example I have chosen to review is the market for the Beanie Babies toy before and after they became popular. During the nineties there was a rage amongst adults and children for the popular plush toys called Beanie Babies. This toy beat out sales of all other toys during this time period. At times, the demand for them outweighed the supply with over six dozen different beanbag animals to collect (CNN, 1997). Eventually, there was a change from the original demand curve. This change came about because people wanted the Beanie Babies so badly and were willing to pay much more than what the toys were actually worth. This toy at the time was the big rage and there was an unusual need from consumers to buy the dolls. This big rage caused the outward shift of the demand curve. A smart business manager would raise the prices for these toys and would keep their inventory fully stocked to meet the demand of the...
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