Market Equilibrating Process
ECO561
March 17, 2011
Dr. Anyalezu

Market Equilibrating Process

In determining the number of goods or services demanded by the consumer and the goods or services supplied, business owners will be able to pen point the market price of his or her own products. Therefore, the understanding of supply and demand is important before deciding the equilibrium. With the quantity demanded and supplied as equal, the sales price is known as the equilibrium price (McConnell, 2009).

When looking at equilibrium quantity there are two parts that have to be taken into consideration in a competitive market; quantity demanded and quantity supplied (McConnell, 2009). Combining the two will yield the market equilibrating process in a specific market and balance the supply and demand.

For instance with release of Play Station 3, Sony was the monopoly and could sell their product at any price as wanted. That year, the XBOX 360 and Nintendo Wii released with the ability of virtual reality and exceptional graphics that forced Sony to develop another strategy. Play Stations were not selling and the market equilibrating process began to show its affects. Sony had more supply than demand and eventually had to drop their price to stay competitive.

In addition, the price of a product and household income plays a major determinant that can affect the equilibrium price (McConnell, 2009). From personal experience, waiting until the price of Play Stations dropped tremendously was important before making a purchase because of income. In this case, competition was good for the consumer as it forced three major competitors to make Sony’s product affordable for the average buyer. With the market equilibrium in place can be good for the economy but as seen it can be a positive or negative affect. Businesses understand that