Market Equilibration Process
ECO/561
Market Equilibration Process
Economics by McConell, Brue, and Flynn described the economic concepts of supply, demand, and market equilibrium. In this paper there will be real world examples while discussing the market equilibrium process. In everyday life, we experience market equilibrating when we get laid off, fired or even when we decide to change jobs or embark on a new career. When we get a new job we may make new purchases to “celebrate,” we may buy a new wardrobe, take a vacation, and even buy a new car. The flip side is if we lose a job, we will spend less as there is less money to spend. We tend to cut back on our unnecessary wants and stick to our needs (McConnell, Flynn 2009).
Demand
Demand is the product or products that consumers are willing to purchase during a specific time frame. It also shows the quantities purchased at various price points. An important characteristic of demand is when prices fall, the need arises and as the prices increase, the demand subsides. The bond between the price and demand is known as an opposite relationship or, as economists call it, the law of demand. In discussing the law of demand, an example could be the housing market equilibrating process. An example of this is the current housing market. Many are in houses that are now worth less, because of the current market. One could call it a disequilibrium or debit.
About a decade ago the housing market was going through the roof, and the demand was unable to keep up with the supply. There was an increase in the housing market and growths all through the United States of America, consumers became able to take loans with illiberal or relaxed qualification criteria. Some loans were for more than what the house was actually worth, some even found themselves with balloon payments that were out of their reach. There were many individuals “flipping” properties, expecting the housing market boom...