Essays on How Are Expected Future Prices in a Competitive Market Often Affected by Current Demand and Supply Assignment

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The paper "How Are Expected Future Prices in a Competitive Market Often Affected by Current Demand and Supply" is a wonderful example of an assignment on macro and microeconomics. A competitive market refers to a market that comprises of many sellers and buyers in that no single seller or buyer can be able to influence or control the price or any other aspect. There is an efficient allocation of resources in a competitive market. Efficiency in this market is attained because competition among the buyers forces them to pay the demand price while competition among the sellers forces them to price their products at a minimum supply price.

The diagram below represents a typical competitive market that has attained market equilibrium (Investopedia, 2012). The demand curve is market D and the supply curve is labeled S. the price p0 is derived from the interaction of demand and supply curve. This market price is highly dependent on these crucial components of markets. The exchange of commodities occurs when the sellers and buyers agree on the price. When the exchange occurs, the equilibrium price p0 and q0 .

Competition among the buyers pushes the price to the maximum price on the demand curve while competition among the sellers pushes the supply price of the products and services down on the supply curve. With competition from both sellers and buyers, the price of the market is simultaneously on the supply and demand curve (Investopedia, 2012). How current demand affects future prices of goods and services in a competitive market From the diagram above, if the price goes below p0 the quantity demand will be greater than what the suppliers can supply.

In this case, the customers will be anxious to buy the product or service while the suppliers will be unwilling to supply the product or service while result in a shortage of the product or services. So as to cope with the shortage, the customers will have to pay a higher price for the product or service while suppliers will demand a higher price for their product so as to make the product available in the market. The end result is prices will rise from p2 to p1 (Parkin, Powell& Matthews, 2002).

This is as illustrated below

References

Investopedia, (2012) Economics Basics: Demand and Supply Retrieved on 23rd May 2012 from http://www.investopedia.com/university/economics/economics3.asp#axzz1vg6Jfy9u

Parkin M, Powell M, Matthews K (2002). Economics, Harlow: Addison-Wesley.

Perloff J (2008). Microeconomics Theory & Applications with Calculus.Pearson.

Wall S, Griffiths A (2008). Economics for Business and Management, Financial Times Prentice Hall.

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