Market Equilibrium

609 Words Oct 1st, 2012 3 Pages
Market Equilibrium Process

Glenda M. Manayon
University of Phoenix
ECO 561
2 October 2012
Al Gourrier, MBA

Market Equilibrium Process In a free market economy producers maximize profit by satisfying consumers demands while commodities that are available are determined by the budget constraints of its consumers. Market equilibrium is a significant part of a business’ success. The market determines equilibrium prices leaving business managers the task of determining business decisions while factoring in the law of supply and demand, and its economic principles for the financial success of the organization. This paper will discuss the following four concepts that are important in market equilibrium
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To obtain the “energy blend” X energy company have to pay more and pass it on to consumers. The law of supply states that “As price rises, the quantity supplied rises; as price falls, the quantity supplied falls” (McConnell, Brue & Flynn, 2009, p. 51). Suppose One shot energy is doing very well, getting good reviews from health professionals, dieticians, and fitness specialists. Consumers will be willing to pay more and price will increase. Thus, creating anew equilibriumg with a higher price. Demand increases but supply curve does not change. With consumers willing to pay more for the effectivity of One shot energy drink, X energy company is motivated to supply more of its product at a higher price. Equilibrium then is reached when consumer demand peaks and supplying more product would not be profitable. The equilibrium price and quantity in the energy supplement business produces that is “right” from the economic perspective to create an efficient market. Demand reflects the benefit of the product while supply reflects the cost of the good. Supply and demand are the most powerful tools in understanding the scarcity of goods and services and how to generate a bigger profit and avoid losses.

References:
McConnell, C. R., Brue, S. L.,
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