Equilibrurating Process Paper

WEEK 1 MARKET EQUILIBRATING PROCESS

Karen M. Gandy

ECO561

June 14, 2010

Professor David Mozinski

WEEK 1 MARKET EQUILIBRATING PROCESS

Market equilibrium is equilibrium price and equilibrium quantity in which equilibrium price is "price where the intentions of the buyers and sellers match" and equilibrium quantity is "quantity demanded and quantity supplied at the equilibrium price in a competitive market". (McConnell, Brue and Flynn) Recent economic times and home owners being upside-down on their mortgages so not able to sell they are looking at home improvements versus selling. Reasons for doing improvements is the hope that the market for houses will eventually go back up and now they have increased their value even more. One such improvement is the choice of kitchen countertops.

In today's market several choices of countertops exist to include granite, concrete, stainless steel, and corian. Looking at market equilibrium in relation to countertops, supply and demand for all of these styles are very high depending on home owners preferences. Each contractor will have set prices, Home Depot's prices range from $49 a square foot up to $60 or higher and Lowes is around the same price. Each company has different styles and companies to choose from. One can even find an independent contractor who can provide a better price, which would trigger the equilibrium process. If an independent contractor was to drop prices, according to a PowerPoint presentation "as price falls, quantity demanded rises, and quantity supplied would falls". (University of Missouri-Kansas City) This would also cause Home Depot and Lowes to drop their prices to stay in competition and allow market equilibrium to happen so that price and quantity demanded and supplied are in equilibrium.

As the Nation turns to come out of a recession, prices for different styles of countertops start to arise and would the market equilibrium process to start over again. If Home Depot...