Equilibrium Process

Market Equilibration Process

Gregory Ivie

University of Phoenix

Economics

ECO/561

John Lindvall

May 31, 2013

Market Equilibration Process Paper

This paper contains a brief explanation of the effects on the market equilibration process in the commercial trucking industry after the Motor Carrier Act of 1980 was signed by former president Jimmy Carter. It also lists some basic examples of how the law of demand, the basic determinants of demand, change in Demand, law of supply, the determinants of supply, the efficient markets theory and how a surplus and a shortage occurs in the freight transport market segment.

Jimmy Carter signed the Motor Carrier Act of 1980 into legislation on July 1st 1980. The objective of the act was to remove government restrictions and red tape in the trucking industry, “reduce unnecessary regulation by the Federal government” as the act states (Carter, 1980). Prior to 1980 the commercial trucking industry’s regulations were created and enforced by the Interstate Commerce Commission (ICC). The ICC made it extremely prohibitive for new trucking companies to enter the industry while also restricting the licensing of new truck drivers. In a different Motor Carrier Act in 1935, truckers required a "certificate of public convenience and necessity" to operate.  

Transport rates required filing with the ICC 30 days prior to the effective date. Competitors were allowed to look at filed rates and bring up issues questioning their legality. This caused many problems between competing companies. From the 1940-s until 1980, it was very hard to expand or create a new service. The ICC determined which current-trucking companies had authority over newer ones. The next best option was to purchase a route from an existing trucking company, which sometimes went for hundreds of thousands of dollars. This was a...