Market Equilibrium Process Paper

Topics: Supply and demand, Economic equilibrium, Market Pages: 3 (1074 words) Published: June 3, 2012
Market Equilibrium Process

Economics/561

Monday, February 6, 2012
Professor Michael Shackelford

Market Equilibrium Process

According to "Business Week" (n.d.) “Market equilibrium is a situation in which the supply of an item is exactly equal to its demand. Since there is neither surplus nor shortage in the market, price tends to remain stable in this situation.”  (Market Equilibrium). The market equilibration process is very important to manufactures and sellers in the marketplace because it allows them to evaluate the potential supply and demand of the product or service before it hits the market for consumption. It also allows them to consider what the demand and supply determinants for the product or service will be in an effort to forecast any surplus or shortage. A real-world experience that is occurring in the free market today is the supply and demand for gold. According to "World Gold Council" (2012), “The demand and supply dynamics of the gold market underpins the precious metal’s extensive appeal and functionality, including its characteristics as an investment vehicle.” (Demand & Supply). Gold is used for a variety of reasons and is acquired many ways. The delivery and usage of gold will be depicted in this paper. Law of Demand and the Determinants of Demand

The law of demand tells us that, other things equal, consumers will buy more of a product when its price declines and less when its price increases.” (McConnell, Brue, & Flynn, 2009, p.114). Today, gold has a demand for technological use, investment purposes, and jewelry demand. For technological demand, gold has a variety of uses According to "World Gold Council" (2012), “Recent research has uncovered a number of new practical uses for gold, including its function as a catalyst in fuel cells, as well as chemical processing and pollution control. The potential to use Nan particles of gold in advanced electronics, glazing coatings, and cancer treatments offers...

References: Business Week. (n.d.). Retrieved from http://www.businessdictionary.com/definition/market-equilibrium.html
World Gold Council. (2012). Retrieved from http://www.gold.org/investment/why_how_and_where/why_invest/demand_and_supply/
The Free Dictionary. (2012). Retrieved from http://financial-dictionary.thefreedictionary.com/Efficient+Market+Hypothesis
McConnell, C.R., Brue, S.L., & Flynn, S.M. (2009).  Economics: Principles, Problems, and Policies (18th ed.). New York, NY: McGraw Hill/Irwin.
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