Market Equilibrating Process

Market Equilibrating Process Paper

Cindy Borgen

University of Phoenix

Economics

ECO/561

Greg Kropkowski

February 26, 2010

Market Equilibrating Process Paper

What better way to see the market equilibrating process but by evaluating an economic decision based on a true life experience dealing with a real estate transaction. One can see how the market’s prices, quantity, supply, and demand, all react to each other in this type of transaction.

Markets bring together buyers (“demanders”) and sellers (“suppliers”). Within this marketplace, sellers (“suppliers”) offer goods or services for sale and buyers (“demanders”) purchase said goods or services (McConnell, Brue, & Flynn, 2009). In the real estate field, the suppliers offer homes for sale and the demanders purchase these homes normally based upon demander requirements and income qualifications.

The good offered for sale in this situation is a small but common piece of parcel, which accommodates a three bedroom, one bath house, and one car garage. No upgrades or special amenities make this house stand out among the rest; it is a plain, average home. Because of market conditions later explained, this home received five offers within two hours and sold for $10,000 more than listed.

At the same time this house is presented for sale, the real estate market is preparing to go full swing; new construction recently started progressing, and there is a huge influx of people wanting to take residence within the state. This situation sets the stage for an inadequate amount of available homes and creates conditions in which choice of purchases is based upon poor emotions and restricted options (McConnell, Brue, & Flynn, 2009). The product demand for single family housing far exceeded the availability of homes and created a somewhat scarce economic resource in that of “housing.”

Many variables work at different times within the real estate process. At the beginning, there is a...