Market Equillibrium

Machele Bardge

ECO/561 Economics

May 9, 2012

Dr. Robert Dratwa

Market equilibrium creates an environment to explore the behavior of buyers and sellers, and the place where buyers and sellers meet compatibility will create market equilibrium. The buyer at this point wants to buy the exact amount the seller has on hand. This is where the quantity demanded and supplied are equal and there is rest with no incentives for price changing. Supply and demand can be applied to just about anything where trade is possible. According to Medvedovski (2011) if all factors hold relevant, the higher the price for a good the less the quantity demanded for that good, and the lower the price for a good the more a demand in quantity will be for a good.

For example, during the spring and summer seasons there is more of a demand for fresh fruits and vegetables at the farmer’s market and grocery stores than in the winter and fall season, when people tend to eat more canned and frozen fruits and vegetables. During this seasonal period when crops are harvested price will drop or be cut, to attract buyers. If the price is increased, will likely lead to a decrease in quantity demanded. All of this can be attributed to the law of demand which is a diminishing marginal value, meaning consumers will buy more of the produce only if price is progressively reduced. Decreasing the price for a particular produce will allow the consumer to have more purchasing power.

Some factors that can change demand are if the buyer decides he or she doesn’t want any more of a product. For example, having a healthy immune system is popular, so there is a demand for herbal tea, or a decline in the number of bicyclists reduces the demand for bikes. If the economy is doing well, there is a demand in consumer spending of normal goods, while reducing the demand for dollar items.

In terms of supply and market equilibrium, “as the...