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
what is the use of models in economics?

What is use of analytical tools in the modern economics? Analytical Tools: Modern economics also gives different powerful analytical tools which are usually specified by geo


Q. Market Income and Socialism? Market Income: A household's total pre-tax income obtained from its activities in formal economy, including salaries andwages, investment income

How economic theory explain optimum pattern of consumption for an individual consumer

If Coolest IceCream ice cream parlor has been closing at 5pm with $120 of marginal revenue and $80 of marginal cost for the last hour open, what should Coolest IceCream do to maxim

Capital Account: The Capital Account presents transfers of money and other capital items and changes in the country's foreign assets and liabilities resulting from the transac

do you give solutions

using ? tools of economic highlight on comsumption

When should a firm shut down production in the short run?