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
Cross-Price Elasticity of Demand is explained below: Cross price elasticity of the demand is the percentage change in the quantity demanded of a particular good, with respect t

Using the Wage Rate and Output per Hour as indicated on the table below, calculate the output per dollar wage and unit labor cost. Then decide on the optimal wage rate for this c

What are externalities? Give an example of positive and negative externality and explain why the market outcomes are inefficient in the presence of externalities?

Change in consumer and  producer surplus from price controls * Observations: - The loss is equal to area B + C. - The change in surplus = (A - B) + (-A - C) = -B - C -

Q. Explain about Gross Domestic Product? Gross Domestic Product:Value of all the services and goods produced for money in an economy, evaluated at their market prices. Excludes

What is the theory of second best

Monopolistic Competition and Oligopoly: It was recognized that most industries exhibit the features of monopolistic competition in real-life. However, it must be pointed out t

explain the following disadvantages of amalgamation. Complex nature

why d block elements are called inner transition elements?

What is meant by non Price Competition? In which market structure does it exist?  None price competition is an effort put by the supplier to earn extra profit without enhancing