Economics/561 Market Equilibrium Process
Market Equilibrium Process
Economics/561
Monday, February 6, 2012
Professor Michael Shackelford
Market Equilibrium Process
According to "Business Week" (n.d.) “Market equilibrium is a situation in which the supply of an item is exactly equal to its demand. Since there is neither surplus nor shortage in the market, price tends to remain stable in this situation.” (Market Equilibrium). The market equilibration process is very important to manufactures and sellers in the marketplace because it allows them to evaluate the potential supply and demand of the product or service before it hits the market for consumption. It also allows them to consider what the demand and supply determinants for the product or service will be in …show more content…
Gold is used for a variety of reasons and is acquired many ways. The delivery and usage of gold will be depicted in this paper. Law of Demand and the Determinants of Demand The law of demand tells us that, other things equal, consumers will buy more of a product when its price declines and less when its price increases.” (McConnell, Brue, & Flynn, 2009, p.114). Today, gold has a demand for technological use, investment purposes, and jewelry demand. For technological demand, gold has a variety of uses According to "World Gold Council" (2012), “Recent research has uncovered a number of new practical uses for gold, including its function as a catalyst in fuel cells, as well as chemical processing and pollution control. The potential to use Nan particles of gold in advanced electronics, glazing coatings, and cancer treatments offers promising new areas of scientific research.” (Demand & Supply). Gold is also an important demand for investments, According to "World Gold Council" (2012), “Since 2003, investment has represented the strongest source of growth in demand. …show more content…
In other words, an investor should not expect to earn an abnormal return (above the market return) through either technical analysis or fundamental analysis.” (Efficient Market Hypothesis). This explanation suggests when consumers decide to make investments in gold or any other valuable commodity that they have all the information available to make their decision.
Surplus and Shortage If the market price is above the equilibrium price, quantity supplied is greater than quantity demanded, creating a surplus so the market price will fall. If the market price is below the equilibrium price, quantity supplied is less than quantity demanded, creating a shortage. Based on the research provided; right now gold is in a shortage which is why the price is high. There are so many companies offering cash for gold at the highest prices that it speaks to the state of the current market.
References
Business Week. (n.d.). Retrieved from
Economics/561
Monday, February 6, 2012
Professor Michael Shackelford
Market Equilibrium Process
According to "Business Week" (n.d.) “Market equilibrium is a situation in which the supply of an item is exactly equal to its demand. Since there is neither surplus nor shortage in the market, price tends to remain stable in this situation.” (Market Equilibrium). The market equilibration process is very important to manufactures and sellers in the marketplace because it allows them to evaluate the potential supply and demand of the product or service before it hits the market for consumption. It also allows them to consider what the demand and supply determinants for the product or service will be in …show more content…
Gold is used for a variety of reasons and is acquired many ways. The delivery and usage of gold will be depicted in this paper. Law of Demand and the Determinants of Demand The law of demand tells us that, other things equal, consumers will buy more of a product when its price declines and less when its price increases.” (McConnell, Brue, & Flynn, 2009, p.114). Today, gold has a demand for technological use, investment purposes, and jewelry demand. For technological demand, gold has a variety of uses According to "World Gold Council" (2012), “Recent research has uncovered a number of new practical uses for gold, including its function as a catalyst in fuel cells, as well as chemical processing and pollution control. The potential to use Nan particles of gold in advanced electronics, glazing coatings, and cancer treatments offers promising new areas of scientific research.” (Demand & Supply). Gold is also an important demand for investments, According to "World Gold Council" (2012), “Since 2003, investment has represented the strongest source of growth in demand. …show more content…
In other words, an investor should not expect to earn an abnormal return (above the market return) through either technical analysis or fundamental analysis.” (Efficient Market Hypothesis). This explanation suggests when consumers decide to make investments in gold or any other valuable commodity that they have all the information available to make their decision.
Surplus and Shortage If the market price is above the equilibrium price, quantity supplied is greater than quantity demanded, creating a surplus so the market price will fall. If the market price is below the equilibrium price, quantity supplied is less than quantity demanded, creating a shortage. Based on the research provided; right now gold is in a shortage which is why the price is high. There are so many companies offering cash for gold at the highest prices that it speaks to the state of the current market.
References
Business Week. (n.d.). Retrieved from