For this price will be bid up toward the equilibrium level of $6. Only at a price of $6 per kilogram are the actions of both buyers and sellers in harmony, so that there is neither a surplus nor a shortage. As a result, the price will stabilize at the equilibrium level of $6 per kilogram.
The interaction of supply and demand can also be shown on a graph, as in Figure 7-13. On the graph, the equilibrium price of $6 is determined by the intersection of the supply curve and the demand curve at the equilibrium point (E). Similarly, the intersection of the curves determines the quantity that will be bought (and sold), or the “equilibrium quantity” of 50,000 kilograms.
In summary, the way in which supply and demand interact to determine the price of a product or service can be represented on a schedule such as Figure 7-12, or on a graph such as Figure 7-13. Both the schedule and the graph depict the behavior of buyers (demand) and sellers (supply) in the market for a particular good or service, and the equilibrium price and quantity that will emerge in that market.
Figure 7-13 is a very static representation of a market, showing the demand for and supply of steak at a particular time (March 1982). In reality, however, markets are not static as Figure 7—13 seems to suggest, but are dynamic, with constant changes in supply and demand occurring, causing continual changes in equilibrium prices and quantities. In effect, then, Figure 7—13 is a snapshot of a dynamic, changing situation at a particular point in time. In the next chapter, we will consider how markets change and adjust in response to changes in both supply and demand.
http://www.forexforexforexforex.com/
Related Websites - Will Water Become More Expensive than Oil? As if things couldn't get worse, how does additional price increases at the grocery store sound for 2009? Many California farmers will allow their farmland to sit idle this year because they simply can't get enough water, or get adequate...
- The Continued Slow Deflation of the Housing Bubble The stock market perked up last week. Does that signal the beginning of a return to the good old days? After all, the Obama economic team is feverishly pulling out all of the stops in its attempt to restart the...
- Should I Sell My Stock Should I sell my stock or Mutual Fund? Over the weekend my brother asked me a question about a mutual fund he owned. How do you decide when to sell my stock or mutual fund? I will treat them...
- Gold Jumps: Has It Become Correlated To The Stock Market? I've been an avid collector of gold and silver coins and have been following the prices for a years. Gold is supposed to have a negative correlation with the stock market. This year has proved otherwise. Of course, as we've...