Market_Equilibrim

Market Equilibrium Process Paper Introduction This paper will discuss the market equilibrium process in my own experience. Market Equilibrium is defined as condition where a market price is produced through competition in such a way that the amount of goods or services demanded by buyers is equal to the amount of goods and services supplied by sellers. The equilibrium price and quantity are established at the intersection of the supply and demand curves. The interaction of market demand and market supply adjusts the price to the point at which the quantities demanded and supply is equal. This is the equilibrium price. The corresponding quantity is the equilibrium quantity. (McConnell, Brue & Flynn, 2009). The ability of market forces to synchronize selling and buying decisions to eliminate potential surpluses and shortages is known as the rationing function of prices. The equilibrium quantity in competitive markets reflects both productive efficiency and allocative efficiency (McConnell, Brue & Flynn, 2009). Anytime you may have a price that is below the equilibrium will it the a shortage in the buyers market. However, if you reverse that and the price falls above the equilibrium price you will have a surplus which means sellers are unable to sell the goods and are forced to lower the prices. Personal Experience I love Pizza and if I could I would eat it everyday. My favorite Pizza restaurant is Pizza Hut. The franchise has a special that is to die for, for instance; Large Pizza, any toppings, any crust, for $10.00. This type of special is broadcast all over the radio and TV. This type of advertising has helped drive demand for the $10.00. At this price, market equilibrium is occurring at the $10.00 price because at that price, the quantity demanded equals the quantity supplied. At the equilibrium price of $10.00, both seller and buyer are satisfied with the price. Furthermore, the equilibrium process keeps Pizza Hut prices balanced and to compete at the highest level with other pizza competitors. Conclusion In order to ensure that businesses do not have a surplus or shortage, businesses must make sure to attain it. Lastly, whenever there is a change in supply and/or in demand it does affect the market equilibrium. References McConnell, Brue, and Flynn. (2009). Economics: Principles, Problems, Policies (18th ed.). New York, NY: McGraw-Hill Irwin.