Please enable JavaScript.
Coggle requires JavaScript to display documents.
Market Equilibrium (The purpose of the price mechanism (signalling,…
Market Equilibrium
The purpose of the price mechanism
signalling
transmitting preferences
rationing
Demand and supply elasticies determine the extent of price and quantity changes
Agriculture
Supply is inelastic because of time lags
Food is demand inelastic because it is a necesiity
Demand is income elastic
Supply is increasing because of fertilisers and machinery, e.g. Britain can provide 62% of its food needs with just 2% of the workforce
Holding back stock
Price volaitility
Housing
Low interest rates
Supply inelastic
Rental prices
Speculation
Government Policy, e.g. 'Right to Buy' council houses
Excess supply / Surplus
Market Equilibrium means a state of balance between market demand and supply.
Excess demand / Shortage
Consumer surplus
Producer surplus
Cobweb theory