Market Equilibrium

Market Equilibrium Process – Flash Drives

University of Phoenix Online

8 August 2011

Instructor: Dr. Alexander Heil

Market Equilibrium Process – Flash Drives

Introduction

Understanding the influences in the market is critical to succeeding in today’s business world. Concepts including supply, demand, and equilibrium are cornerstone components of the free market. In recent history, I have watched as the dynamic market for flash drives has undergone significant changes in price and quantity produced, to finally settling at equilibrium. The flash drive first entered the market in 1998; however, by the end of 2000, “memory stick media market share grew from 7 percent in the first quarter to over 25 percent by the fourth quarter” (Askey, 2001).

The intent of this paper is to outline how the laws of supply and demand influenced the process of reaching market equilibrium for flash drives. As well, it will further examine how efficient market theory applies this is product and how product surplus and shortage is overcome.

Law of Demand

The law of demand is defined as “a negative or inverse relationship between price and quantity demanded” (McConnell, Brue, & Flynn, 2009. p. 47). This law of demand requires suppliers to consider the value of their product and the requirement from society when deciding what level of production will yield the most profit. The production of flash drives began first emerged on the market in 1998. The item was a technological advance from the previous floppy disk or re-writeable compact discs.

As a new product, flash drives were very expensive and therefore, the quantity demanded was small, in accordance with the law of demand. As the detriments of demand came into effect the changes were evident. The new technology satisfied consumer’s preference, surpassed the customer’s expectation, was more reliable, and held significantly more information than its possible substitute products. Appendix A displays various graphs...