Market_Equilibrating_Process

Market Equilibrating Process Economics is used to study “how individuals, institutions, and society make optimal choices under conditions of scarcity.” (McConnell, Brue, & Flynn, 2009) Part of economics is the market equilibrating 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. It is important to understand there are different factors which affects the supply and demand which would lead to a change in the market equilibrium. The increase in Hyundai sales in 2010 is a great example of how a change in demand can create a change in supply which in turn would change the market equilibrium. All throughout 2010, Hyundai made headlines in the auto industry such as: ‘Hyundai defies downturn to post record profits,’ ‘Hyundai Sales End Year Up A Staggering 24% - December Sales Soar 33%,’ and Hyundai bucks the trend with a sales increase.’ What brought about this change and what made Hyundai different from the other automakers' One of the reasons for the change could be explained by the price of related goods, which states “a change in the price of a related good may either increase or decrease the demand for a product.” (McConnell, Brue, & Flynn, 2009) Hyundai has always been less expensive then it competitors as it has been around for the last six decades but have not seen increase of these magnitude. “The South Korean group was one of few carmakers to have a good 2009 as the global economic crisis increased demand for smaller, fuel-efficient vehicles, while its rivals such as General Motors and Toyota Motor suffered losses amid the industry’s worst downturn in decades.” (Jung-A, Jan ) Part of the reason for the increase in sales the theory “because we can’t have it all, we must decide what we will have and what we must forgo.” (McConnell, Brue, & Flynn, 2009) The world is undergoing an economic recession, with unemployment rates not seen since the Great Depression which has greatly affected consumers’ income which would not only affect their wants but their tastes. Added to the fact with Toyota facing recalls, it has created a change in demand for Hyundai. Hyundai is known for being economical and offering the best warranties, "Hyundai is getting their new and improved vehicles in the hands of consumers who are proudly showing them off to their peers.” (Schoenberger, Janu) The change in people’s income and taste has affected the demand for Hyundai for the better as people are making rational choices to forgo certain things to adjust to the lower income and the different economic climate by buying economical cars to suit the times. Hyundai was able to create the product in which people are willing to buy. Only time will tell when people’s income rises again and with the other auto makers recovering and making adjustments to the change in people’s taste is Hyundai would be able to continue making strides it has in the market. References Jung-A, S. (Jan 28, 2010). Hyundai defies downturn to post record profits. Retrieved from http://www.ft.com/cms/s/0/6af27e8e-0be0-11df-96b9-00144feabdc0.html#axzz1A8D341D4 McConnell, C., Brue, S., & Flynn, S. (2009). Economics: Principles, problems, and policies (18th ed.). New York, NY: McGraw-Hill Irwin. Schoenberger, R. (January 4, 2011). Auto sales climb in 2010 with Ford and Hyundai leading the way. Retrieved from http://www.cleveland.com/business/index.ssf/2011/01/auto_sales_climb_in_2010_with.html