Week 1

Running head: MARKET EQUILIBRATING PROCESS

Market Equilibrating Process

Anoo Chandran

University of Phoenix, ECO/561

Prof. John Randall

March 29, 2010

Economic equilibrium is a condition which is achieved when various economic forces are balanced and economic variables will not change in the absence of external agents. It is the intersection point at which Qd=Qs that is Total demand=Total Supply. Market equilibrium is a state achieved when the quantum of goods or services demanded by consumers is equal to the quantum of goods or services produced by producers. Market equilibrium price is often called the pricewhen Qd=Qs and will alter unless demand or supply alters.

According to me , an relevant personal example will be -A booker prize winner book called “The White Tiger “by Aravind Adiga costs an arm and a leg in its original version. The price is too high for book-lovers and readers. When the book is reprinted in another version form(use of local paper ,ink and a local printing machine) it becomes economic and within reach of book lovers .As price drops demand also increases and the supply too which is boosted by the increasing demand .So at an even equilibrium Price , total books demanded =total books supplied.

When the book price is above the equilibrium point (law) there is a excess of supply of books. When the book price is below the equilibrium point there is a paucity in supply. Different supply curves and different demand curves have different points of economic equilibrium. In economics, the term equilibrium is used to indicate a state of "balance" or stability between supply forces and demand forces. For example, an increase in supply will disrupt the equilibrium, leading to lower prices. It is importannt to reach to a new equilibrium in most markets. Then, there will be no change in price or the amount of output bought and sold — until external factors such as changes in technology or tastes come into play.A...