The market mechanism , Microeconomics

The Market Mechanism 

195_market mechanism.1.png

Features of the equilibrium or market clearing price:

– QD = QS 

– No shortage or scarcity 

– No extra supply price. 

– No pressure on the price to vary 

2369_market mechanism.1.png

The market price is above equilibrium 

– There is much supply 

– Producers decreases prices 

– Quantity demanded increases and quantity supplied reduces 

– The market continuously adjust until the equilibrium price is attained. 

1124_market mechanism2.png

The market price is under equilibrium: 

– There is a scarcity

– Producers increase  prices

– Quantity demanded reduces and quantity supplied continuosly adjust until the new equilibrium price is attained. 

Market Mechanism Summary

 1) Supply and demand communicates to find out the market-clearing price.

 2) When not in equilibrium, the market will arrange to alleviate a scarcity or surplus and revert back the market to equilibrium.

 3) Markets should be competitive for the mechanism to be effective.

Posted Date: 7/24/2012 8:01:20 AM | Location : United States







Related Discussions:- The market mechanism , Assignment Help, Ask Question on The market mechanism , Get Answer, Expert's Help, The market mechanism Discussions

Write discussion on The market mechanism
Your posts are moderated
Related Questions

Taxes: Compulsory government levies collected to pay for public spending. There are numerous types of taxes (corporate, income, wealth, sales, environmentaland payroll taxes); each


what are the properties of marshallian demand function


BUREAUCRACY: M de Gournay, an economist of France, first coined the word Bureaucracy in the eighteenth century to refer to "a fourth or fifth form of Government" in which "off

What two measures have been developed in recent years that subtract for the depreciation of both manufactured capital and natural capital? The environmentally adjusted Net Dome


Q. What do you meant by Relative Poverty? Relative Poverty: A measure of poverty based on an individual or family's relative income compared to overall average level of income

Write the formulas to show the reactants and products for the following reactions. Assume that solutions are aqueous unless otherwise indicated. Represent substances in solutions a