Still searching for the new equilibrium

Consumers and producers react differently to price changes. Higher prices often tend to reduce demand while encouraging supply, and lower prices increase demand while discouraging supply. Economic theory says that, in a free market there will be a single price which brings demand and supply into balance, called equilibrium price. Both parties need the resources that the other has and hence there is a considerable incentive to engage in an exchange.

From a consumer’s point of view, a market that is moving in any direction, is considered good news as it gives a lot of opportunities. However, in a producer’s point of view, it is better to have a stable market rather than one that is constantly moving.

With the Eurozone crisis escalating towards 20, underlying problems are still long way from being resolved. However, despite the dramatic headlines, a sense of perspective is needed. Although the onset of the downturn was almost four years ago, the adjustment process continues. What we are witnessing is a series of at times are economic "aftershocks", as we move to an environment where global growth will undoubtedly be slower and lower. 

Reference

Economics Online (2013) Market Equilibrium. Available from: http://www.economicsonline.co.uk/Competitive_markets/Market_equilibrium.html  [Accessed on: 1/7/13]

http://www.flightglobal.com/news/articles/market-outlook-still-searching-for-the-new-equilibrium-374734/

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Done by: Isaac Nicklaus Pek, 0315378