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Demand, Supply, and Equilibrium
Jordan Gray
Columbia Southern University
Demand, Supply, and Equilibrium
Movement along the demand curve is a variance in the equilibrium due to a change in the price of the commodity. The new equilibrium is still on the demand curve. It occurs when there is a change in quantity demanded in the market due to a change in price, holding other factors constant (Malyshkin, 2016). Movement along the supply curve is seen when there is a new equilibrium in the market due to a change in price, holding other factors constant. It occurs when the quantity supplied changes due to changes in price, and the new equilibrium is still located on the supply curve (Stank et al., 2012). A shift of the demand curve occurs when other factors apart from price cause a change in the equilibrium, and in this case, a new demand curve is formed. Similarly, the shift of the supply curve occurs when there is a new equilibrium and supply curve due to other factors in the market apart from price (Malyshkin, 2016). Changes in price cause movement along the demand and supply curves; however, the shift of the supply and demand curves is caused by other factors that affect demand and supply.
As explained above, a change in price causes movement along the curves while the other factors cause a shift of the curves. Consider the market of coffee; for example, an increase in the price of coffee will lead to decreased quantity demanded by consumers while the suppliers will increase quantity supplied. Now, consider the same market when the price of substitutes such as tea goes down. There will be a whole new demand and supply curve in the coffee market.
Equilibrium in a market can be found by combining the demand and supply curves in the same graph. Where the two curves intersect, represent the price and quantity that suppliers are willing and able to supply the commodity in the market (Becker et al., 2017). The intersection point also represents the price and quantity that consumers are willing and able to consume from the market. A shift in the demand or supply curve will lead to the formation of new equilibrium; however, the forces of demand and supply cannot rectify this change as they can rectify change caused by movement along the curves.
The energy industry experiences fluctuations and changes in its supply and demand curves in the country. This paper will focus on the demand and supply of oil in the energy industry. Currently, the quantity of oil demanded is high as it is during most summers. The quantity supplied is also soaring. The country imported 4,528,000 barrels of oil per day on moving average by 30th July 2021 (US Energy Information Administration, 2021). In April before Summer the same year, the moving average was 1,329,000 barrels per day. The increased demand for oil causes this shift during summer. The oil price is $0.935 per liter, which the consumers are willing and able to pay as reflected in quantity demanded (US Energy Information Administration, 2021). The price in June was 0.55 per liter. Therefore, there’s been a shift in the supply and demand curves of oil in the US.
The oil market is a global industry subject to many different forces that may cause a shift in its supply. However, this particular shift was caused by the change in weather. As summer approached, the demand for oil went up, which caused an increase in the price, and the suppliers, motivated by price, supplied more oil. Similarly, the shift in demand was caused by the weather. When summer set in, there was an increase in demand for cars and vehicles that people weren’t using during winter (Cashin et al., 2014). There was also a drastic increase in the number of people who wanted to travel, which significantly increased oil consumption in the country.
References
Becker, G. S., Michael, G., & Michael, R. T. (2017). Economic theory. Routledge.
Cashin, P., Mohaddes, K., Raissi, M., & Raissi, M. (2014). The differential effects of oil demand and supply shocks on the global economy. Energy Economics, 44, 113-134.
Malyshkin, V. (2016). Market Dynamics. On Supply and Demand Concepts. SSRN Electronic Journal.
Stank, T. P., Esper, T. L., Crook, T. R., & Autry, C. W. (2012). Creating relevant value through demand and supply integration. Journal of Business Logistics, 33(2), 167-172.
US Energy Information Administration. (2021). Petroleum and Other Liquids. Independent statistics and Analysis. Retrieved from: https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCRNTUS2&f=W
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