Eco561_Week_1

The Market Equilibrium of The Market Equilibrium of Television Technology When one understands the economics of supply and demand and the equilibrium price, one will know when to finally spend the money on the purchase of that highly coveted new monstrously huge, flat screen TV. According to McConnell, Brue, and Flynn, 2009, “The equilibrium price (or market-clearing price) is the price where the intentions of buyers and sellers match. It is the price where quantity demanded equals quantity supplied.” Once new technology is developed that has a major impact on a product, there is a high demand for this item. The demand comes from those consumers who have the financial means to allocate the funds for such a purchase. The equilibrium price is set in which anticipated supply and demand will meet. The supply eventually increases due to technology advancements that result in production cost savings. The product can then be made at a lesser cost and therefore sold at a lesser price. The price reduction is what allows more consumers to purchase the product causing a demand shift to the right of an equilibrium price graph. The old technology televisions experience the reverse effect when new technology is released. The demand for these units decrease as most consumers will vie for the new technology and this product experiences a demand shift to the left and a new equilibrium price is established based on supply and demand. Worth noting are the changes in quantity supplied on a fixed supply curve, during the pre-Superbowl weeks, there is a spike in the demand and quantity supplied as consumers are readying for the big game. Most consumers will not immediately purchase the new technology simply because of the price being so inflated, because production methods are not quite being fined tuned yet. Once new production methods are ramped up to provide the same product in mass and for a lesser cost, prices drop because more units can be produced without experiencing additional resource costs and the equilibrium price will adjust. When the equilibrium price adjusts to the lower price, this is when the majority of consumers will take the plunge and purchase the highly coveted new monstrously huge, flat screen TV. REFERENCES McConnell, Brue, Flynn (2009) Economics, Principles, Problems, and Policies (18th ed.). New York, NY: McGraw-Hill Irwin.