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
plese give me supply assigement

Data were taken with a Data Acquisition System (DAQ) and stored in the data file 'data.txt'. 'data.txt' is a text file with 3 columns containing the following data: Column 1: Ti

what is disposable income and its importance.

How many half-lives are required for the concentration of reactant to decrease to 1.56% of its original value?


Formal and Informal systems  - MRP System Most production systems are full of 'pushes' and 'pulls'. The formal system issues orders, ie 'pushes'. The informal system tries to

explain graphically Equilibrium of a multi product firm

define perspective of managerial economics.

given short run total cost curve :10q^2+4q=100 and short run marginal cost MC=20q+4 and market demand Q=100-p what''s the equation of the short run supply curve?

Pure Monopoly: Pure monopoly examined the market structure that is generally regarded as the polar opposite of perfect competition – i.e. the monopoly model. Like the perfect