Eco_561

Market Equilibrating Process Paper 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 real life example of this would be when there is a shortage of produce like oranges due to bad weather during the winter where a lot of the citrus crop is damaged by frost. Due to this shortage on supply the price on oranges would increase. Equilibrium price, the common ground for a buyer and a seller is ultimately what we are looking for here. It was noticeable at your grocery store the increase on prices. Consumers choose not to pay the high prices meaning that the supply of oranges will increase and possibly go bad should no one continue to buy them. Sometimes businesses as a result of this choose to lower the prices before the produce will go bad even if this means that won’t make a lot profit. It is at this point the equilibrium price is found. If consumers were willing to pay the high prices for these produces the market will become competitive and the business will start making different strategies to allure consumers in their direction. This competition will start bringing the prices of the produces down, but it is important that business understand that they need to set up a line before bringing the price too low and hurting the market permanently. Because some businesses have been careless about this, other businesses have suffered and they have gone out of business. Conclusion Competition is good to drive some business to lower their prices and consumers will get better prices. Market equilibrium is good for the economy but once that equilibrium goes either up or down, it affects the economy. We all remember the price of gas going sky rocket the economy was severely affected by it. People have to understand what market equilibrium is and start acting more pro-active towards maintaining a financial stability in their families. References: 1. McConnell, Brue, Flynn (2009) – Demand, Supply and Market Equilibrium