Market Equilibration Process
ECO/561
Market Equilibration Process
The aim of the assignment is to learn and understand the procedure of market equilibrium and its maintenance. I will also be mentioning the law and the factors determining the demand and supply and the Market theory, surplus and shortages. I shall use the Housing Market of Cupertino, California and also have attached an Appendix A which illustrates the graphs that show when the supply got equalized with demand, when the demand increased but the supply was same and no change in demand but decrease in supply.
Law of Demand and its determinants
The law of demand in simple words tells that consumer is going to make more purchases of a product when its price is decreased and fewer purchases when the price rises. The factors which determine this are the rates of related goods, income, own taste, wealthiness, what consumer expects from the product and the conditions of the business. Cupertino, California is such an area that has been searched for many times as it is in the center of the Silicon Valley; it has a nice placement and is also one of the best school district. So, demand for the houses in the area is constantly high.
Law of Supply and its determinants
Law of supply of goods is concerned to quantity offered for sale in a specific market at specific time at numerous pricings (Thomas). The factors determining it include resource price, technology used in production, other costs, expectations of a seller and number of people selling. In Cupertino, California the curve showing supply was affected slimly during the period of recession in 2008-2009 and then once more in 2010. The change that was seen is that the same properties that had at least 10-12 people bidding for a single one of them, now the number of bidders was reduced to roughly 6-7 bidders. Moreover if we looked at the properties pricings they weren’t any significant change and they varied...