Equilibrium in the Market Essay

1210 Words5 Pages
As with all markets and their respective economies, having equilibrium is one of the key factors of a successful system. Although most markets do not reach equilibrium, they attempt at getting close. There are numerous methods devised to reach equilibrium, whether they involve human intervention directly or a cumulative decision by all factors involved. These factors may be a seller's willingness to lower overall revenue, or a buyer's willingness to withhold some demand for a certain product. Of course, the basics of supply and demand retrospectively control the equilibrium in the market. Supply and demand is one of the most simple-looking aspects of an economy and its study, but yet it presents the greatest challenge to analysts.…show more content…
Higher prices from the demand point of view mean less quantity needed, if any at all. An individual will not invest in an item that is not reasonably priced, or is not needed at all anyways. Having that perfect price is what attracts and grasps the individual. As with all forms of supply and demand, there is always a healthy quantity of competitive fuel, driving a business to push farther and innovate even greater. When comparing two businesses or products, they always represent two systems: the Substitutes, or the Compliments. Substitutive businesses are ones that proportionately attract one another. By having one business innovate and raise prices, the other business benefits by getting a higher demand. Usually these businesses are heterogenous, having two products that are of equal quality, but different fine details. By having, for example, one car manufacturer that amps its design up to a luxury class car, it provides a higher demand for the lower class cars, while still generating profit from the consumers purchasing their product for a higher price. Simply, higher prices mean less quantity needs to be sold to break even and generated profit. Compliments, on the other hand, are more derogatory towards one business, while beneficial to the other. Two business that are Complimentary to each other are usually businesses that have a "host-parasite" appearance. The host business fuels
Open Document