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
Explain about the duality between direct and indirect utility. Duality between Direct and Indirect Utility: While seen how one can recover an indirect utility function by ob

b) Sally’s firm produces granola bars with a fixed cost of 10 (this cost is already sunk). Her variable cost function is VC = q2 + 2q. Assuming the market for granola bars is comp

Consider an infinitely repeated prisoner's dilemma game by two players. The resultant payoffs at each stage by the actions of two players are given below in the table (payoffs are

Strictly give the diff. btw the theory of reciprocal demand & theory of comparative advantage

Find the market-clearing price and quantity of burritos.

Private and Social Benefits Private benefits are those which accrue to an individual. They may be both monetary and non monetary, direct and indirect. Earnings of an individua


WORLD BANK: The World Bank group is a partner in opening markets and strengthening economies. Its goal is to improve the quality of life and expand prosperity for people every

Risk Loving - A person is a risk loving if they show a preference toward the uncertain income over a certain income having same expected value. Examples: Gambling, some

Given the following table MUx MUx/Px Qty MUy MUy/Py 80 40 1 68 17 52 26 2 32 8 20 10 3 28 7 16 8 4 24 6 8 4 5 20 5