Market Equilibrium

Only available on StudyMode
  • Download(s) : 144
  • Published : July 4, 2010
Open Document
Text Preview
Market Equilibrium
June 24, 2010

Market Equilibrium
In this paper the concept of market equilibrium process will be explained and also it will explicate the real word experience relate to equilibrium. Demand and supply are the tools which can help us for better understanding of how individual markets work. With understanding of demand and supply, we can show how the decisions of buyers of goods or services interact with the decisions of sellers to determine the equilibrium (McConnell, Brue& Flynn, 2009). We are looking for the equilibrium price and equilibrium quantity. The equilibrium price is the price where the goals of buyer and seller match. In other words, Market equilibrium is a condition where the amounts of goods or services which are demanded by buyers are equal to the amount of goods or services supplied by sellers (McConnell, Brue& Flynn, 2009). However, change in intentions of demand, such as price of product, the household’s income, tastes or preference will affect the equilibrium of a markets. On the other side, changes in the determinant of supplier such as changes in production costs, technology and prices of related goods and services cause the change in equilibrium markets (McConnell, Brue& Flynn, 2009). For instance any raise in fuel price will increase the total cost of using an automobile. however paying more for gasoline for using a car is not inevitable. Consumers try to adjust their automobile’s usage cost by switching to fuel efficiency cars. As a result, change in gasoline price in fact alters consumer needs and tests. Consumers try to sell their used cars and buy fuel efficiency automobiles. This means shifting in equilibrium point in both used and new cars. In this paper has been tried to explain how gasoline price will effect on used car supply. We assumed used car are supplied by who own the used car, and he/she decides to exchange it with new fuel efficiency car. Therefore in used car market...
tracking img