Market Equilibrium and Industry Changes

Running head: MARKET EQUILIBRIUM AND INDUSTRY CHANGES
Market Equilibrium and Industry Changes
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1MARKET EQUILIBRIUM AND INDUSTRY CHANGES
Executive Summary
Market equilibrium is the market clearing price and output which is measured by the amount of
output sellers are willing, able to sell and buyers are willing to buy. The equilibrium determines
the market in which a firm operates. The effect of equilibrium price and quantity is a key factor
for investors and managers to anticipate future costs and make plans accordingly. However, this
equilibrium is different according to industry and commodity type.

2MARKET EQUILIBRIUM AND INDUSTRY CHANGES
Table of Contents
Introduction......................................................................................................................................3
Discussion........................................................................................................................................3
Conclusion.......................................................................................................................................7
Reference List..................................................................................................................................9

3MARKET EQUILIBRIUM AND INDUSTRY CHANGES
Introduction
Market equilibrium is the point where quantity demanded by the buyers equals to the
quantity supplied by the sellers at a particular price. The specified price is the market clearing
price because goods and services must be sold at that price with given amount of quantity. This
optimum equilibrium level is different according to industries. This is one of the most interesting
topics as market equilibrium has an important role to determine the type of industry in which a
firm operates. Industries transform themselves according to the demand and supply changes due
to market determined price and quantity. Industries and equilibrium level varies due to consumer
preference and availability of substitutes or complements (Cowell 2018).
Discussion
A market is a place where buyers and sellers meet and figure out the price of a product
along with the output level. According to the law of demand, demand for a commodity rises due
to fall in price and vice-versa, showing a negative relation (Karl 2019). Whereas, law of supply
says that with increase in price, supply goes up as selling goods are more profitable, showing a
positive relation. Thus, demand curve is downward sloping and supply curve is upward sloping.
The point where quantity demanded by consumers intersects with quantity supplied by sellers
gives equilibrium price. Let’s take an example.
Quantit
y Price of suppliers($) Price of consumers($)
1 32 6
2 30 8
3 28 10
4 26 12
5 25 16
6 24 18
7 23 19
8 20 20