Market Equilibrium Process

Topics: Supply and demand, Economic equilibrium, Microeconomics Pages: 3 (622 words) Published: May 29, 2012
Market Equilibrium Process
Natascha Brown
University of Phoenix
ECO 561
Facilitator: Richard McIntire
May 28, 2012

Market equilibrium is a balance between the supply and demand parts of economics. The market is equal when there is no surplus or shortage in the market there is no need to change prices. Much like our own lives, equilibrium is maintained by balancing supply (income) with demand (debt). Your finances are considered imbalanced when you owe more on loans, etc. then you have incoming to maintain those payments. It is imperative for business owners to understand the importance of supply and demand and its effects on managerial decisions.

Law of Demand and the Determinants of Demand
Demand is a …statement of a buyer’s plans, or intentions with respect to the purchase of a product [over a specified period of time] (McConnell, Brue, & Flynn, 2009). The Law of demand considers the price of a product and its relation to the quantity demanded. Accordingly, as prices decreases then demand increases and as prices increase then demand for that product decreases. There is a negative or inverse relationship between price and quantity demanded (McConnell, Brue, & Flynn, 2009). There are other factors called determinants of demand that can and do affect purchases. Those factors are: the prices of comparable goods, consumer income, the amount of buyers in given market and consumer’s preferences. Law of Supply and the Determinants of Supply

Supply is a schedule…[demonstrating the different] amounts of a product that a producer

are willing and able to sell in a specified period of time (McConnell, Brue, & Flynn, 2009). The

law of supply states that with all things equal, as price increases, the amount supplied increases;

as price decreases the amount supplied decreases. [This] relationship between price and quantity

supplied is positive, or direct (McConnell, Brue, & Flynn, 2009). There are factors called...
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