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Week Two_ Market Equilibration Process Paper

Bobby Taylor

Economics 561

April 25, 2013
Aleksandr Kocharyan, PhD, instructor

Market Equilibration Process Paper

The following content items are expected to be developed: • The paper/presentation includes specifics about Law of Demand and lists main determinants of demand, Law of Supply and lists main determinants of supply.
The basic determinants of demand are (1) consumers’ tastes (preferences)- a change that makes the product more desirable—means that more of it will be demanded at each price. Demand will increase; the demand curve will shift rightward. An unfavorable change in consumer preferences will decrease demand, shifting the demand curve to the left., (2) the number of buyers in the market,- An increase in the number of buyers in a market is likely to increase product demand; a decrease in the number of buyers will probably decrease demand. (3) consumers’ incomes,- For most products, a rise in income causes an increase in demand. (4) the prices of related goods,- A change in the price of a related good may either increase or decrease the demand for a product, depending on whether the related good is a substitute or a complement: and (5) consumer expectations- Changes in consumer expectations may shift demand. A newly formed expectation of higher future prices may cause consumers to buy now in order to “beat” the anticipated price rises, thus increasing current demand.

• The paper/presentation explains how equilibrium and disequilibria (surplus and shortage) occur on the market. - The equilibrium price (or marketclearing price ) is the price where the intentions of buyers and sellers match. It is the price where quantity demanded equals quantity supplied. There is neither a shortage nor a surplus. Competition among buyers and among sellers

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