Marketing_Equilibration_Process_Paper

Marketing Equilibration Process Paper ECO/561 Marketing Equilibration Process Paper * The market equilibrating process is the method or methods in which manufacturers tend on maintaining a balance between supply and demand reaching equilibrium. This is help by using competition between and among buyers and sellers sets off equilibrium process. For example firms with excess inventories cut prices to try to undersell their competition. As the price falls, quantity demanded rises, and quantity supplied falls. Buyers competing with one another for goods in short supply bid up price to try to capture some of the good as price goes up, demand falls and supply rises (McConnell, 2009). I think looking at an electronic device is a perfect example. Take the iphone, the new versions are always in demand but the old versions are easily replaced. When AT&T had a monopoly on the iphone other companies tried to put out products like the droid or update the blackberry so that it was able to compete with AT&T. Now that AT&T does not have the sole contract for this device there is still a demand but it is across the board and not solely with one company. * The law of demand also affects the market equilibrating process. The law of demand in theory says that there is a negative relation between price and quantity demanded. For example if price goes up, quantity demanded goes down; if price goes down, quantity demanded goes up (McConnell, 2009). This can be seen when an iphone was brand new they used to sell for over $400.00 and people would purchase them, as they changed and newer versions came out the price went down, and the demand went up more people were buying them that could not afford them previously. * The law of supply also affects the market equilibrating process. The law of supply says that there is a positive relation between price and quantity supplied (McConnell, 2009). For example if price goes up, quantity supplied goes up; if price goes down, quantity supplied goes down. The interesting thing with iphones is that there is never a real surplus of the devices and every year there is a better one coming out, that does not have a glitch or at least the one in the present iphone. Efficient markets theory is an investment theory that says it is impossible to "beat the market" because stock market efficiency causes existing share prices to always incorporate and reflect all relevant information (McConnell, 2009). This allows the iphone to stay in demand and still make a huge product and the stock prices to be steady. References Ball, L. M. (2009). Money, banking, and financial markets. New York, NY: Worth Publishers. McConnell, C. R., Brue, S. L., & Flynn, S. M. (2009). Economics: Principles, problems, and policies (18th ed.). Boston, MA: McGraw-Hill Irwin.