Market Equilibration Process
Market Equilibration Process
Pamela Kerr
University of Phoenix
ECO/561
Joel Spina
September 01, 2014
Market Equilibration Process
The economy affects all areas of one’s life and understanding the laws of supply and demand allow one to understand when the market is in a state of equilibrium. This paper discusses market equilibrium associated with the supply and demand of sugar cane in Brazil. The author will discuss the law of supply and demand with the detriments of demand and supply, describe efficient markets theory, and explain surplus and shortage.
Brazil
Brazil is one of the world’s largest suppliers of sugar, but inclement weather has decreased sugar supply. Brazil delivers more than 50% of the world’s sugar, and the 2011 decline is the first since 2006 (Roseman, 2011). With the decreased sugar crop, the price of sugar is increasing, thus all products using sugar will increase in price as a result of the shortage. The rise in the cost against the supply and demand of sugar takes the sugar market out of equilibrium. Market equilibrium can only be established when quantity demanded meets the quantity supplied (McConnell, Brue, & Flynn, 2009). See the graph showing the market for sugar in a state of equilibrium, and the market as supplies dwindle and prices rise. For the sugar to reach market equilibrium again the supply of sugar must be raised or the demand for sugar must decrease. By raising the price of sugar, the market demand will decrease, thus causing the market to reach a state of equilibrium again.
The Law of Supply and Demand
For one to understand market equilibrium, one must have a valid understanding of the law of supply and demand. Generally speaking, the law of supply and demand is defined as the producers supplying the goods that people are searching for or want (What is Economics?, n.d.). A higher demand of product causes manufacturers to increase price, but increased price means consumers are less
Pamela Kerr
University of Phoenix
ECO/561
Joel Spina
September 01, 2014
Market Equilibration Process
The economy affects all areas of one’s life and understanding the laws of supply and demand allow one to understand when the market is in a state of equilibrium. This paper discusses market equilibrium associated with the supply and demand of sugar cane in Brazil. The author will discuss the law of supply and demand with the detriments of demand and supply, describe efficient markets theory, and explain surplus and shortage.
Brazil
Brazil is one of the world’s largest suppliers of sugar, but inclement weather has decreased sugar supply. Brazil delivers more than 50% of the world’s sugar, and the 2011 decline is the first since 2006 (Roseman, 2011). With the decreased sugar crop, the price of sugar is increasing, thus all products using sugar will increase in price as a result of the shortage. The rise in the cost against the supply and demand of sugar takes the sugar market out of equilibrium. Market equilibrium can only be established when quantity demanded meets the quantity supplied (McConnell, Brue, & Flynn, 2009). See the graph showing the market for sugar in a state of equilibrium, and the market as supplies dwindle and prices rise. For the sugar to reach market equilibrium again the supply of sugar must be raised or the demand for sugar must decrease. By raising the price of sugar, the market demand will decrease, thus causing the market to reach a state of equilibrium again.
The Law of Supply and Demand
For one to understand market equilibrium, one must have a valid understanding of the law of supply and demand. Generally speaking, the law of supply and demand is defined as the producers supplying the goods that people are searching for or want (What is Economics?, n.d.). A higher demand of product causes manufacturers to increase price, but increased price means consumers are less
References: Colander, D. C., Sephton, P., & Richter, C. (2003). Chapter 5: Using supply and demand. In Macroeconomics (2nd Canadian ed., pp. 104-131). Retrieved from http://highered.mheducation.com/sites/0070901104/information_center_view0/sample_chapter.html McConnell, C. R., Brue, S. L., & Flynn, S. M. (2009). Economics: Principles, problems, & policies (18th ed.). Retrieved from https://newclassroom3.phoenix.edu/Classroom/#/contextid/OSIRIS:47397274/context/co/view/home Roseman, E. (2011, July 7). Poor Brazilian crop threatens sugar supplies. The Sovereign Investor Daily. Retrieved from http://thesovereigninvestor.com/commodities/sugar-supplies-threatened-by-poor-brazilian-crop/ What is Economics? (n.d.). http://www.whatiseconomics.org/the-law-of-supply-and-demand