Market Equilbrating Process

Market Equilibrating Process

Joseph R. Jackson

University of Phoenix

Economics ECO/561

Michael Compson

September 3, 2010

This week’s readings provided an important concept to the supply and demand of the marketed products of companies. Companies rely on supplying the demand of their goods to the consumer to generate revenue. Demand is defined as the amount of goods that consumers are prepared and capable to purchase during a period of time. Supply is defined as the amount of goods that manufacturers are prepared and capable to make accessible for sale during a period of time. Examples that can affect the demand of goods are consumer’s income, price of goods, quality of goods, competition/substitutes, and customer expectations. Therefore, understanding supply and demand helps companies figure out how much of goods to generate and the price to set on these goods to meet the consumers demand. Companies use market equilibrating to help find the balance in supply, demand, and pricing.

According to investpedia, “market equilibrating is defined as the state in which market supply and demand balances each other and, as a result, prices become stable” (Investpedia, p. 1). To basically explain market equilibrating, it is when quantity supplied equals the quantity demanded, which creates a market price suitable to the supplier and consumer. As an example, when companies set the prices on their goods too high, consumers will cut back purchasing the higher priced good because the consumer goods are not worth the value. Therefore, the demand of the goods will depreciate and the quantity supplied by the company will go beyond the quantity demanded. However, when companies set the prices on their goods to low, consumers will buy more of the goods than the company can supply, which creates a shortage of supply.

Relating the concepts of supply, demand, and market equilibrating to my prior experience, I would have to relate it to my career. I work as an...