Market_Equilibrating_Process_Paper

Market Equilibrating Process Paper The market equilibrating process is described by McConnell, Brue and Flynn (2009) as, “In competitive markets, prices adjust to the equilibrium level at which quantitiy demanded equals quantity supplied.” An example of the market equilibrating process is that of loan surveys. During the housing boom there was a high demand for loan surveys. Loan surveys are needed when buying a house, these surveys show where the house is located in reference to the property line, where the any easements are if they exists, if there are any out-buildings (sheds, old well houses, barns, etc.) and so on. Basically it is a signed and sealed drawing by a surveyor or engineer saying the house is safe to move into in. During the summer a company could do almost a thousand of these loan surveys and in the slow months (the winter) near to three or four hundred. This allowed for the price of the loan survey to be reduced. There were times when field crew members would go out and do whole blocks of houses at a time, resulting in ten or twelve loan surveys being done at once. This resulted in the reduction of cost on both ends; the clients and the companies so the price was adjusted accordingly. The quanitity demanded equaled the quantity supplied during this time period and the prices were adjusted accordingly. As the housing bubble burst and the housing sales slowed down to an almost complete stop loan surveys were no longer became a source of income for the company and the price was adjusted accordingly. During the summer months the company was lucky to even do more than ten loan surveys over the course of the whole summer. During the winter months the loan surveys were non-existent. The quantity demanded no longer equaled the quantity supplied so the price had to be adjusted in order for the market equilibrium price for loan surveys to be back in equilibrium again. Reference McConnell, C.R., Brue, S.L., & Flynn, S.M. (2009). Economics: Principles, Problems, and Policies. (18th ed.). New York: McGraw Hill/Irvin.