How do you think markets determine prices and quantity of production? Can markets fail on meeting people needs?
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1. I think markets determine prices and quantity of production by looking at the supply and demand. When price is low, demand is high, but supply would be lower. Now, when price is high, demand is low, and supply is higher. In markets, there is a wish to find equilibrium in the market. This is when supply and demand are in balance in the market. A market can fail on meeting people’s needs when the market is not in equilibrium. This can result in a shortage of supply. When demand is too high and the production level, or supply, is very low, a shortage comes about. This can be seen when taking a look at the beginning of the pandemic. When everything first started going on lockdown and the pandemic started, a lot of cleaning supplies was in high demand. I’m sure everyone remembers when so many people tried to get toilet paper, cleaning wipes, and hand sanitizer but there were low amounts to be found. The demand for these products were so high and companies were not able to keep up with it. During this time, there was no equilibrium in the market, so the supply and demand was not balanced, and the markets were failing to meet people’s needs.
2. Market prices are determined by demand and supply. This is the current price for an item or service that is bought or sold to consumers. A lot of people take advantage of inflation or scarce items to profit from these two. For example, when the Russian and Ukraine war began we saw a large hit to our gas prices. Slowly the prices began going up, also considering that we were coming out of a pandemic. Sellers in the marketplace compete against suppliers to sell their products and buyers compete with all the other buyers to obtain these products.
Every company has a product they specialize in that they produce for the consumer population. Market failure occurs when private or public companies cannot provide or produce the products. We have seen this happen plenty of times in the marketplace. For example, during the pandemic, we saw this happen with masks and Lysol products. Most companies and even small businesses began producing masks which made it easier to get a hold of. With the cleaning products, it was a different story. Many people began watching videos on how to make their own solutions because of the scarcity of these items. This is a prime example of market failure not meeting people’s needs.