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Macroeconomics - Supply & Demand

 

            
            
             In your opinion, is our market system in an equilibrium condition?. Are you a consumer being satisfied in the market?. Why or why not?. Give examples to support your conclusions.
             One of the principle sources of fluctuation and growth in any economy is identified by the supply and demand in the market.
             Markets depend on buyers and sellers to become a competitive market where they are mostly controlled by money. Buyers don't have enough and sellers want as much as they can get.
             While supply is the amount of goods a seller is willing and able to sell, it is affected by several facts; prices, input prices, technology and expectations. .
             Demand is the amount of goods a buyer is willing and able to buy but also depends on changes like income, prices of related goods, tastes of consumers and ultimately, expectations too.
             While these definitions help understand the basics of the economy, we also need to understand how the supply and demand are kept in control or what is better called an "equilibrium".
             The market equilibrium occurs at a price where the quantity demanded by consumers meets the quantity supplied by producers.
             When the quantity produced exceeds the quantity demanded it is called a "surplus". For example: A farm produces 6,000 eggs per month and sells them for $1.00 a dozen, but the market where they supply the eggs only sells 4,500 eggs per month. The surplus produced on this is of 1,500 more eggs than needed. These unsold eggs suggest to producers that the price is too high. Unless the price falls, the surplus will continue and the eggs will spoil and their production will be negatively affected by it. By decreasing the price to $0.50 per dozen, they will increase the demand from customers and bring the supply and demand to an "equilibrium".
             On the other hand if the same farm produces the same 6,000 eggs per month and again, sell them for $1.00 a dozen, but now the market where they supplied the eggs needs to sell 8,000 eggs per month, then this becomes a "shortage.


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