The market mechanism , Microeconomics

Assignment Help:

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.


Related Discussions:- The market mechanism

Theories of common property resource management, Normal 0 false...

Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4

Monopoly market, Question : (a) Differentiate between the characterist...

Question : (a) Differentiate between the characteristics of a perfectly competitive market and those of a monopoly market structure. (b) To what extent is a monopoly mark

Explain why each of the following factors may influence the, Explain why ea...

Explain why each of the following factors may influence the own price elasticity of demand for a commodity. (i) Consumer preferences, that is, whether consumers regard the commod

What was the degree of elasticity, A newspaper recently lowered its price f...

A newspaper recently lowered its price from 50 cents to 30 cents. As it did, the number of newspapers it sold increased from 240,000 to 280,000. i)   Over this price range what

Opertunity cost, how do you calculate opportunity cost

how do you calculate opportunity cost

Marginal utility theory, discuss whether marginal utility is a realistic pi...

discuss whether marginal utility is a realistic piece of economy analysis in a consumer demand

Explain three major barriers of developing contries, Explain three major ba...

Explain three major barriers to development experienced by developing countries. Well, the scope of possible answers here is, em, wide, to say the least. The issue is not to si

Price mechanism, how does the prices system affect a country

how does the prices system affect a country

Breadtalk fixed and variable costs in singapore.., I wanted to the fixed an...

I wanted to the fixed and variable costs of breadtalk in singapore from economic perspective

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd