Market Equilibration Process Final Paper
Market Equilibrium Process
Edwina Wilson
ECO 561
January 20, 2015
Robert D’Alessio
Market Equilibrium Process
A condition or state, which the economic forces are at a balance, characterizes Economic Equilibrium. This paper outlines the process of market equilibrium and the restoration factor of the invisible hand. The paper discusses the several factors and the relevant laws governing the market demand and market supply, overall market theory, and shortages/surpluses due to market shifts, demonstrated by the housing market of Cupertino, California. The market graphs presented in Appendix A, and the equilibration process is shown step-by-step via the four graphs. The supply and demand changes in the market, but the graphs show the inevitable equilibration process that result in a balance.
Law of Demand and its Determinants
The Law of Demand is the statement that customers will buy more of the good as the price decreases and purchase less of a good as the price increases. There are many factors that affect the demand curve, including prices of complementary and substitute goods, personal taste, and income (McConnell, Brue, & Flynn, 2009). In the market of houses in Cupertino, California, the area is well-known and explored, being in the heart of Silicon Valley. Furthermore, the house locations are convenient and appropriate, and have the best school districts. Thus, the demand for homes in Cupertino tends to stay high.
Law of Supply and its Determinants
The Law of Supply is the governing principle of the market supply. The Law dictates the amount of individual goods at each price level. Producers will provide more of the good as the price increases, and will supply less of a good as the price decreases. There are many factors that affect the supply curve such as prices of inputs, technological advancements, and expectations of the producer for the future (McConnell, Brue, & Flynn, 2009). In Cupertino, the supply for houses barely fluctuated, only changing
Edwina Wilson
ECO 561
January 20, 2015
Robert D’Alessio
Market Equilibrium Process
A condition or state, which the economic forces are at a balance, characterizes Economic Equilibrium. This paper outlines the process of market equilibrium and the restoration factor of the invisible hand. The paper discusses the several factors and the relevant laws governing the market demand and market supply, overall market theory, and shortages/surpluses due to market shifts, demonstrated by the housing market of Cupertino, California. The market graphs presented in Appendix A, and the equilibration process is shown step-by-step via the four graphs. The supply and demand changes in the market, but the graphs show the inevitable equilibration process that result in a balance.
Law of Demand and its Determinants
The Law of Demand is the statement that customers will buy more of the good as the price decreases and purchase less of a good as the price increases. There are many factors that affect the demand curve, including prices of complementary and substitute goods, personal taste, and income (McConnell, Brue, & Flynn, 2009). In the market of houses in Cupertino, California, the area is well-known and explored, being in the heart of Silicon Valley. Furthermore, the house locations are convenient and appropriate, and have the best school districts. Thus, the demand for homes in Cupertino tends to stay high.
Law of Supply and its Determinants
The Law of Supply is the governing principle of the market supply. The Law dictates the amount of individual goods at each price level. Producers will provide more of the good as the price increases, and will supply less of a good as the price decreases. There are many factors that affect the supply curve such as prices of inputs, technological advancements, and expectations of the producer for the future (McConnell, Brue, & Flynn, 2009). In Cupertino, the supply for houses barely fluctuated, only changing