Question

what drives the market towards the equilibrium market

Answer 1

Answer:

Markets always move toward equilibrium….though that equilibrium can change for a variety of factors. To be specific, consider a given demand curve, with more goods being demanded as the price of the good/service falls. If the existing supply is too low, producers will be encouraged to enter the market and produce more output until demand is satisfied Markets always move toward equilibrium….though that equilibrium can change for a variety of factors. To be specific, consider a given demand curve, with more goods being demanded as the price of the good/service falls. If the existing supply is too low, producers will be encouraged to enter the market and produce more output until demand is satisfied (i.e., equilibrium).

• EXPLANATION:
• EXPLANATION:For example, consider the case of PPE in the current epidemic. When the pandemic occurred, demand for PPE rose dramatically (a shift in the demand curve) and demand far exceeded supply. Prices then rose substantially, supply, a have risen…..and thus, more suppliers entered the market and existing suppliers expanded capacity to produce more PPE → the market moved to a new equilibrium..

Answer 2

Answer:

Generally, an over-supply of goods or services causes prices to go down, which results in higher demand—while an under-supply or shortage causes prices to go up resulting in less demand. The balancing effect of supply and demand results in a state of equilibrium