Skip to main content



Market Clearing Prices and Economics

There is a necessity for market clearing prices also known as an equilibrium. There has to be a balance between the value of the good from a buyer and a seller perspective. This is a network that operates in an economic situation. There will eventually reach a point where the valuation the buyer has for a good and the valuation a seller has for the good, will line up. This works well with economic situations such as a housing market or a futures market.

While there is a strong relationship between the valuations there is also a sense of supply and demand for most goods. This relates to how in class the examples we looked at where people looking to find what room they would get in a house. There is a certain value that a person in the network is going to put on the room compared to other people and in most situations, the person with the highest valuation of a room is going to get that room. This will also bleed into the topic of social welfare and how that will play into the market clearing price of a good. The social welfare is going to be what is best for the collective group resulting in the highest value possible. This connects to the course material in the ways in which a network will work and how the economic market is a large-scale network of buyer and sellers where sellers are looking to have the highest market clearing price and the seller is trying to have the lowest clearing price. This can result in a smaller supply of goods and a greater demand for a good.

https://www.investopedia.com/terms/c/clearingprice.asp

Comments

Leave a Reply

Blogging Calendar

September 2018
M T W T F S S
 12
3456789
10111213141516
17181920212223
24252627282930

Archives