Market Equilibration Process provides a balancing market opportunity for a business organization to adapt to the various changes occurring in the market in their field. To guide the Department in adapting to the demands of adjustment to balance the market. This will enable producers and buyers to be on the same equal price and products. Law of demand balance to exist there must be a request from the product or products or services. There must be willing buyers with the resources available to purchase products or services at the agreed price.
Once the need has been established, these products can be produced or developed. Law of supply this product is supplied to the market the price the consumer is willing to pay, and this in turn creates a balanced market. In case there is a bug in one side, influenced by the balance and shift over to one side. In place of this type there may be a shortage in supply caused the price increase that would result in the competition coming in to fill the void.
Other possibilities are to have excess supply in the market, and this will drop the price of the goods that may cause a significant decline in prices, would create an imbalance in the balance in the market. Efficient markets theory all participants in the market and all relevant get information as soon as it becomes available.
The surplus in the market occurs when there is a surplus of the inks that are displayed is greater than quantity ordered quantity. In this case, some producers will not be able to sell all their goods. This prompted them to lower their prices to make their products more attractive. For many companies the competition and thereby reduce prices reduce the market price of the product. In response to low prices, and consumers increase the quantity demanded, move the market towards balance price and quantity. In this case, excess supply has been downward pressure on the price of the product. Shortage of market occurs when there is excess demand that is the quantity ordered is greater than the amount offered.
In this case, consumers will be able to purchase as much of a commodity as they would like. In response to the demand of consumers and producers alike raise the price of the product and the amount they are willing to provide. The increase in price will be too high for some consumers; they will not demand the product. At the same time increase the amount of available products that satisfy consumers others.
Here we show an equilibrium price of Pe. What if the price were P1, which is higher than Pe? The quantity supplied would exceed the quantity demanded atthe price. The result would be an excess quantity supplied at price P1, or a “surplus.” But given D and S, there will be forces pushing the price back down toward Pe. Suppliers will attempt to reduce their inventories by cutting prices, and producers, seeing a lower price, will cut back on the quantity supplied. As the price falls, demanders will offer to purchase more–that is, the quantity demanded will increase. If not prevented from moving, the price will eventually reach its equilibrium at Pe again. What if the price is, for some reason, at P2? At this below-equilibrium price, the quantity demanded exceeds the quantity supplied. There is an excess quantity demanded at P2, or a “shortage.” Market forces will cause the price to rise. Demanders will bid up the price and suppliers will raise the price.
The point of this analysis is that any disequilibrium situation automatically brings into action correcting forces that will cause a movement back toward equilibrium. The equilibrium price and quantity will be maintained so long as demand and supply do not change. When we refer to a stable equilibrium, we mean that if there is a movement away from the equilibrium price or quantity, there will be forces pushing price or quantity back to the equilibrium level or rate. An unstable equilibrium is one in which, if there is a movement away from the equilibrium, there are forces that push price and/or quantity farther away from equilibrium (or at least do not push price and quantity back toward the equilibrium level or rate). (“Stable And Unstable Equilibria”, n.d).
Market Equilibration Process
Market equilibrium is the point in which industry offers goods at the price consumers will consume without creating a shortage or a surplus of goods. Shortages drive up the cost of goods while surpluses drive the cost of goods down, finding the balance in the process is market equilibrium. A good example of a market equilibrium commodity would be the price of gasoline. Currently a barrel of oil is around $81.00USD. This has resulted in an increase in the price of a gallon by about $1.00 from one year ago to an average of about $3.00 per gallon of gasoline. While driving habits have not started to change, people are taking notice and may be looking to make changes should price continue to rise. The sector of the market that is taking notice and making a changes is those homes that use oil for heating. The recent cold snap in the mid-west and east has increased the need and usage of oil. The $1.00 increase in price per gallon of gas from a year ago is resulting in a larger percentage of increase in home heating. Consumers are starting to make changes in their live style in order to achieve a personal equilibrium in their budget. The dollar increase may not seem like much but the bottom line result is in increase of about 3% – 5% in homes heating costs. The reasons sighted for the increase in oil is increased consumption by China, colder than normal temperature is Europe and shortages in Europe due to their unseasonable amount of snow fall in the large cities (2010, 07).
With all the commotion going on in the Middle East and the ever increasing demand for Oil by countries such as China and the U.S it is very easy to see why price of crude oil and gasoline keeps climbing. According to Rodney Schulz of Schulz Financial, “One may argue that the oil market is not efficient because a few large players, such as some of OPEC’s largest producers, have the ability to move prices. And that is true, as well as the fact that insiders in those organizations can take advantage of certain information” (2012, 03). He stated further that Looking at the oil and gas industry, one immediately finds evidence of market efficiency with oil and gas prices. First, if the market were not efficient, firms that did nothing but trade oil and gas futures would be as ubiquitous as independent producers. Moreover, they would perform as well in down markets as in up markets. This would be an easy business to start, as there are almost no barriers to entry. However, firms that do nothing other than trade oil and gas futures are practically nonexistent (2012, 03).
- (2010, 07). Market Equilibrating Process Paper. StudyMode.com. Retrieved 07, 2010, from http://www.studymode.com/essays/Market-Equilibrating-Process-Paper-359014.html
- (2012, 03). Market Equilibration Process Paper. StudyMode.com. Retrieved 03, 2012, from http://www.studymode.com/essays/Market-Equilibration-Process-Paper-932326.html
- Stable and Unstable Equilibria. (n.d). Retrieved from http://wps.aw.com/aw_miller_econtoday_13/29/7556/1934389.cw/content/index.html
Cite this essay
Market Equilibration Process and Business Adaptation. (2016, May 18). Retrieved from https://studymoose.com/market-equilibration-process-and-business-adaptation-essay