Market Equilibrium Essay

622 WordsFeb 4, 20143 Pages
Market Equilibration Process Marcy ECO/561 March 25, 2013 Dennis Mc Guckian Market Equilibration Process Balance is the key to life. One has to make decisions everyday to maintain balance. In business and for business managers this is also true. Market equilibrium is derived from the balance of supply and demand. To understand market equilibrium it is important to understand supply and demand and how this will determine the price charged for a product or service. The law of demand states that all other things being equal or held constant, as the price of a product or service increases the demand will decrease. Economists break down the factors affecting demand into five categories; price of product, income, price of complimentary and substitute goods, tastes, taxes, and expectations both of price and quality (Krugman & Wells, 2013). The law of supply states that all other things being equal, as the price of a product or service increases the supply of that product or service will also increase. The four factors that affect supply are price, input price, technology, and expectations of price and quality (Krugman & Wells, 2013). For myself coffee in the morning is one necessity of life. I therefore have to balance the need for a quality cup of coffee with the need to stay within my grocery budget every month; however I am just one consumer. The price of wholesale coffee beans, are a real life example of how the price per pound fluctuates with supply and demand. In the competitive market of coffee beans, supply and demand, is determined by how many buyers and sellers there are for coffee beans. To find the market equilibrium one needs to look at the key elements, the demand curve, the supply curve, and market equilibrium (Krugman & Wells, 2013). Demand for Coffee (One pound bags) | Price of Coffee Beans (per One pound Bag)

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