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The price is so high, consumers begin to become reluctant to pay for the item. Retailers must lower prices to unload their excess inventory of Tickle Me Elmos, Cabbage Patch Kids, or Zhu pets.
A state of perfect equilibrium for a long period of time is rare. Perhaps one example of perfect equilibrium might be found at an elementary school that sells pizza to its students. The demand is relatively constant, given that the student population remains the same from week to week, and students have relatively few other options. Students whose parents give them money for pizza have no choice but to buy food on-site, since they have cannot eat otherwise; students who 'brown bag it' are unlikely to buy lunch, even if the pizza is substantially cheaper one day. Because lunchtime is finite, few students have the time to eat more than one or two slices, so they will not buy more if price is lowered. The vendor has discovered over time what price students are willing to pay so the pizza parlor can still make a profit and can guess what the demand will be, based upon the fixed number of students and the time of year or week. Although some students may...
If demand goes down as price goes up, the producer may have to make fewer pizzas. This could cause an upsurge in demand, as students begin to see the pizzas disappearing more quickly at lunch. However, if input costs and available substitutions remain relatively stable, when numbers of demanding consumers are unaltered, as is supply, price is likely to be stable under these relatively controlled market conditions.
References
Demand, supply, and market equilibrium. (2010). Prentice Hall. Retrieved March 2, 2010 at http://wps.prenhall.com/bp_casefair_econf_7e/30/7931/2030537.cw/index.html
Market equilibrium. (2010). Business Dictionary. Retrieved March 2, 2010 at http://www.businessdictionary.com/definition/market-equilibrium.html
Market Equilibration Process for Computer Peripherals That Experience High Level of Cyclicality The demand for computer peripherals in general for the inkjet and low-end nonimpact printers specifically has continually proven to be highly inelastic, where price reductions are not as effective as a continual stream of new product innovations. Having completed internships with peripherals manufacturers, this observation became very clear as product management and marketing teams continually tested the market equilibration process
Market Equilibrium Individual market equilibration process The laws of supply and demand as they relate to market equilibrium are manifested every Christmas, when children's toys are bought and sold. Quite often there is a hot toy that all children suddenly seem to want. Suppliers cannot manufacture enough toys to suit the demand of parents. As demand increases, price increases. Suppliers, eager to sell more of the desired toy, begin to increase supply
Whether equilibrium is characterized by market clearing or not depends on which equilibrating forces are free to operate in the labor market in question. In the standard labor market models, three fundamental equilibrating forces are postulated. First, firms are free to hire as many or as few workers as they want depending on wages and other conditions of employment. Second, workers are free within limits to move from one market
Market Equilibration The process of achieving a market equilibrium relies on some basic principles. The principle of demand holds that, all other things being equal, the higher the price of a good the less people will demand of that good (Investopedia, 2012). There are exceptions to this law, for example goods with inverse price elasticity of demand, but in general the law of demand holds for all goods, even those with
S. 2. Movie theaters should solve their problem by allowing for market pricing on seats at different showings. I would borrow a system that is in place at some discount airlines. This is a good business to take cues from because, like the movie theater business, they have regularly scheduled but perishable supply. The prices for each seat would depend on how many seats for the showing remained. The first, say, ten
In economic terms this can be represented as a graph, with two lines; one for the way demand emerges and one for the way supply emerges. The demand line shows the way demand will manifest; the usual pattern is that as the price of a good increases less people will want to buy it, this decrease the demand (Gillespie, 2010). If shown on a graph, the line representing the