Market_Equilibration_Process

Introduction Entrepreneurs and big corporations react differently than consumers do when it comes to the price changes of items in demand. Higher prices normally reduces the demand for the product therefore encouraging supply. While lower prices will increase the demand by discourage the supply. This paper will discuss market equilibration which combines supply and demand which makes up the free market theory. Supply and Demand in Business Supply and Demand is what puts business in business, without it there would not be any stores or gas stations. As consumers we normally bargain shop and try to find the right deals at the right price. As a manager we try to look at how we can make a profit for the company without putting the company in a financial bind. The relationship between supply and demand in business is how they affect prices. My company is a food and vending company and we have contract with stadiums for their food service needs. With the NBA, NFL, NHL strikes occurring in the past the company has lost a huge profit because with the lockout consumer could not go to the games therefore tickets sells were not existent so the stadium lost profits as well as the food service companies within the stadiums. The graph below show how the supply was high but the demand was low with prices staying the same since no one could buy tickets. The point where supply and demand intersect in the graph is when equilibrium occurs. This graph represents excess supply. Price s d Excess Supply is when the prices are set too high and excess supply not being utilized. I think if the lockout did not happen equilibrium would have occurred right before peck playing times. For example, opening day for a baseball game there is a demand for tickets and there is plenty of supply. As the season progresses the demand for tickets my lessen and in between that time equilibrium can occur. Market Theory With this opinion comes the market theory or free market theory, which is a market economy based on supply and demand with little or no government control. This is just and idealized form of a market economy where buyers and sellers are allowed to make transactions freely. Equilibrium occurs when supply and demand are in balance with each other which is the free market theory. Equilibrium price is also called market clearing price because at this price the exact quantity that certain producers take to the market will be bought by consumers with no supplies left over. Conclusion When I think of supply and demand I think of food and gas. There will also be an over abundance of these items because producers know that consumers will buy these items. In a competitive market companies will enter into supply and demand expecting to make a profit. It is a hard market to play because consumers change their mind every day and you have change the market for ages and gender to accommodate the consumers. In today's market I would be reluctant to start a business . The risk is too high and the market is too shaky but it all demand on what you are producing and if the consumer will have a demand for it for your business will be able to supply the high demand. Reference McConnell, C. R., Brue, S. L., & Flynn, S. M. (2009). Economics: Principles, problems, and policies(18th ed.). Boston, MA: McGraw-Hill Irwin. Market Equilibrium. (2013). Retrieved from http://www.economicsonline.co.uk/Competitive_Market_equibrium.html Equilibrium. (2013). Retrieved from http://www.investopidia.com