Market Equilibrium Process

|University of Phoenix |

|Market Equilibrium Process |

|Economics 561 |

| |

What is market equilibrium? Market equilibrium is a situation when the supply of a particular item is equal to its demand. “The equilibrium price is the price where the intentions of buyers and sellers match”. (McConnell, Brue & Flynn, 2009 pg. 11) What this means is that supply will shift to ensure that demand is met.

I have experienced an example of the market equilibrium process recently. For the past seven years I have employed by prominent insurance company that sells property & casualty insurance and financial services. Every year at appraisal time I would always receive a pay increase. Thankful for the increases, I always felt that I wasn’t being paid what I was worth. I was aware that I could earn almost double my salary at another company doing the same type of work.

This year, during appraisal time, I received the highest increase received the entire time I worked for the company. The majority of the increase was due an excellent job performance for the previous year. However my supervisor also shared, that my annual salary was in fact below market value. In reaction to the increase in demand, my wages were increased so that it would be equal to the market value of other insurance agents in my state, in comparison to the company’s competition.

It is essential for companies to pay their employees an equal value to that of their competition, as well as their co-workers. This keeps the workplace environment balanced, and keeps your employee turnover rate at a...