The Principle of Market Equilibrium

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09 June 2009

Market Equilibrium

Introduction

Market is a complex conjunction of various market operations , which works to maintain close interrelationships between suppliers and buyers It appears , however , that market efficiency largely depends on how soon particular market niches can achieve equilibrium , as well as the quality of this equilibrium . The housing market is the brightest example of the way equilibrium works in broader economic contexts . Given the scope of housing operations in the U .S , as well as their complexity

, it is obvious that housing market equilibrium can readily serve the source of macroeconomic stability in short and long run . In his article , Nick Timiraos sheds the light onto the major controversies of the current housing markets as well as the ways market equilibrium works in real-life contexts

Timiraos refers to the Case-Schiller home price index as the determining economic index of market equilibrium in housing . The author is confident that apart from the growing gap between the level of demand and the level of housing supply , the housing prices have not fallen low enough to stimulate consumer spending . Home prices have returned to 2002 levels in nominal terms and to 2000 levels when adjusted for inflation . Looking at the historic ratio of home prices to rental prices , home prices are now 9 below the normal market value (Timiraos . Looking at the dynamics of prices through the last 20 years it is obvious that housing prices have fallen 18 down their historical...