Market_Equilibrating

Running Head: MARKET EQUILIBRATING PROCESS Market Equilibrating Process ECO/561 University Of Phoenix January 14, 2010 Market Equilibrating Process Economics is the study of production, consumption, and distribution of goods and services. Economics allows a broader look at the use of scarce goods among a society of unlimited wants by measuring supply and demand. Price and quantity is a measurable value that is needed in order to evaluate the flow of supply and demand. The concept of supply and demand illustrates how prices fluctuate as a result of a supplier’s product availability at a certain price and the willingness and purchasing ability of consumers at a certain price. Demand Shift I recently moved from Colorado to Tennessee because of my husband’s employment. As a result of relocating, I gave up a lucrative job working for a retail company based in Los Angeles, California leaving me unemployed when my husband and I moved to Tennessee. While working in Colorado, I was accustomed to shopping at higher priced stores, eating out on a more frequent basis. With a higher income I was able and willing to purchase more, which increased my demand for consumer goods and services. When I became unemployed in Tennessee my demand for goods and services decreased, which meant that I was unable to shop at the same stores in which I was accustomed. My experience was an example of the effect that income has on consumer demand. As a result of my unemployment, I shifted my demand from higher end stores to outlets. The theory of the income effect “indicates that a lower price increases the purchasing power of a buyer’s money income, enabling the buyer to purchase more of the product than before.” (McConnell, 2009, P.47) Supply An example of supply would be the various products each store was willing able to make available for a sale at each of a series of possible prices (McConnell, 2009). I shopped outlets because outlets carried the overage from retail stores. The overage was normally a smaller selection of goods no longer being manufactured. Since there was no longer a demand for the products then there was not longer a need to manufacture the product. The outlet stores would then sell the products at discounted prices in order to eliminate the last of the overage stock. Market Equilibrium “is the point at which the quantities demanded and supplied are equal” (McConnell, 2009, p.54). A prime example is the coach purse that I bought from an outlet store was purchased at a price that met my demands. The store sold a certain quantity of purses at a price that met the quantity demands of consumers with lower income. Conclusion My experience is a common occurrence in this country in an economic down fall. Suppliers now have to consider the current unemployment rate realizing the decrease in demand they now have to make a smaller supply and sell at lower prices. Reference McConnell, C. R., Brue, S.L., & Flynn S. M. (2009). Economics: Principles, problems, and policies (18th ed.). New York: McGraw Hill/Irwin