Market mechanism and Mean: Difference between pages

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The interaction of [[demand]] and [[supply]], resulting in an equilibrium quantity and price being set by the market.
1. Strictly, the same as the Arithmetic mean.
 
 
When demand exceeds supply, market prices are likely to rise.
 
When supply exceeds demand, market prices are likely to fall.
 
When demand and supply are equal, market prices are likely to remain stable.
 
 
The mechanism described above is a result of the interaction of the [[demand curve]] and the [[supply curve]] in a given market.
 
 
<span style="color:#4B0082">'''Example 1: Demand exceeds supply'''</span>
 
When demand exceeds supply, sellers will run out of stock and realise that they can sell the goods at a higher price.
 
Sellers will increase their prices accordingly.
 
This will cause demand to fall.
 
 
It will also cause supply to increase.
 
Demand will continue to fall, and supply will continue to increase, until demand and supply are equal.
 
At this point prices will in theory be stable, because the previous imbalance of demand and supply has been eliminated.
 
 
 
<span style="color:#4B0082">'''Example 2: Supply exceeds demand'''</span>
 
When supply exceeds demand, sellers will be unable to sell all their stock.
 
Sellers will have to cut their prices to reduce stock.
 
This will cause demand to rise.
 
 
It will also cause supply to decrease.
 
Demand will continue to rise, and supply will continue to fall, until demand and supply are equal.
 
At this point prices will again in theory be stable.


2. The term 'mean' is also sometimes used much more loosely, to refer to any measure of the mid-point (or Central location) of a set of data.


== See also ==
== See also ==
* [[Equilibrium]]
* [[Arithmetic mean]]
* [[Free market]]
* [[Central location]]
* [[Demand]]
* [[Geometric mean]]
* [[Demand curve]]
* [[LIMEAN]]
* [[Pillar 3]]
* [[Mean deviation]]
* [[Supply]]
* [[Mean reversion]]
* [[Supply curve]]
* [[Mean-variance efficiency]]
* [[Median]]
* [[Mode]]
* [[Pearson's Coefficient of Skew]]
* [[Standard deviation]]
* [[Variance]]


[[Category:Accounting,_tax_and_regulation]]
[[Category:The_business_context]]
[[Category:Financial_products_and_markets]]

Revision as of 14:20, 23 October 2012

1. Strictly, the same as the Arithmetic mean.

2. The term 'mean' is also sometimes used much more loosely, to refer to any measure of the mid-point (or Central location) of a set of data.

See also