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Market Equilibration

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Market Equilibration Process

Market Equilibration Process It is important for business managers to understand how market equilibrium is maintained. It is essential for mangers to know how to apply economic principles, specifically supply and demand, to everyday business decisions. In this paper I will describe several economic concepts, such as market equilibrium, supply and demand, and apply their relationship to a real world event.
Market Equilibrium Market equilibrium is a very important concept in the study of economics. “Market equilibrium is a market state where the supply in the market is equal to the demand in the market (“Market Equilibrium in Economics,” 2015).” Often times the market is not in equilibrium, meaning that the quantity supplied does not equal the quantity demanded from consumers. When this occurs it creates shortages or a surplus of goods. A surplus happens when there is excess supply or the quantity supplied is greater than the quantity demanded. A shortage occurs when there is excess demand or the quantity demanded is greater than the quantity supplied (“Market Surpluses & Market Shortages,” 2006). Ultimately, the concept is derived from the laws of supply and demand, which will be discussed in the following paragraphs.
Supply
“Supply is a schedule or curve showing the various amounts of a product that producers are willing and able to make available for sale at each of a series of possible prices during a specific period” (McConnell, Brue, & Flynn, 2009, p. 41). It is important for business managers to know the importance of the law of supply, which states as a prices rises, the quantity supplied rises; as price falls, the quantity supplied falls. Determinants of supply are resource prices, technology, taxes and subsidies, prices of other goods, producer expectations, and the number of sellers in the market.

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