Guillermo Scenero

Market Equilibrating Process

Millicent Henderson

ECO/561 - Economics

January 14,2010

Robert Stack, Instructor

This paper will explore the market equilibrating process and relate this process to a personal experience that has occurred in my life. According to the assigned reading, the equilibrium price for a product is the price at which the demand and supply curves intersect. In competitive markets, prices that are higher than the equilibrium price will result in a surplus and the market price will fall. When the market price is lower than the equilibrium price, a shortage will exist and the market price will rise. The equilibrium price is stable under existing demand and supply conditions. At equilibrium, no tendency for price to change is expected. Changes in supply or demand will cause predictable changes in both the equilibrium price and quantity. (McConnell, Brue, & Flynn,2009).

To find market equilibrium, the two curves are combined on one graph. The place of meeting point of supply and demand indicates the equilibrium point. Unless interfered with, the market will remain at this quantity and price. At the point of connection, sellers and buyers see eye to eye on the quantity and price.

Relating this process to my personal life experience, I look at the housing marketing. I worked for five years as a licensed Real Estate Agent. When I started in the business, it was booming. It was definitely a seller’s market. The demand was high for mega houses, condominiums and investment properties. New construction was appearing everywhere. The seller had the upper hand. The average listing time for properties was 30 days or less before a contract was accepted. The buyer moved quickly to ensure that their offer was accepted. Properties sold at a rapid pace. Then the housing market took a turn for the worst.

In the process of purchasing a house, buyers and sellers must mutually agree on a price before a sale can take place. The...