Market Equilibration Process Paper

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Market Equilibration Process Paper Market equilibrium is the point in which industry offers goods at the price consumers will consume without creating a shortage or a surplus of goods. Shortages drive up the cost of goods while surpluses drive the cost of goods down, finding the balance in the process is market equilibrium. The concept is derived from combining equilibrium price and equilibrium quantity to yield the equilibrium of a specific market. Changes in the determinants of demand, such as how much the product sells and the price of the product can affect the equilibrium of a market. Changes in determinates of supply can also affect a specific market. Supply determinates, such as taxes and subsidies, production techniques,…show more content…
This has resulted in an increase in the average price of a gasoline from about $2.80 in April of 2010 to about $3.50 as of today (Feb., 19 2012). Even though gasoline is considered an inelastic product due to its necessity factor, with time consumer will have to reduce their demand if the price continues to increase. An industry that tends to feel the quick effects of increase in the price of gasoline is the delivery industry. At my organization, any increase in the price of gas is of great concern to the management and the drivers. The organization in conjunction with the drivers is always looking for an equilibrium point at which the organization is still able to make profit while making sure that the driver’s needs are also met. In trying to reach the equilibrium were the organization is profitable and driver’s income demands are met, we employ some measures. The first measure is b what we call localization. By localizing a driver, we try as much as possible to keep a driver within a certain radius so as to reduce the amount of gasoline they utilize daily. To further mitigate the effects of gasoline price increase on the income of the drivers, we also sometimes provide them with gas rebates vouchers. This keeps the drivers motivated since the shock of the price increase in gasoline has been absorbed by the organization. The organization will absorb some of the cost of the price increase but some will eventually be passed on to the customers as
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