The effects supply and demand have on market equilibrium and determination of price.

In the economics demand and supply is one of the key elements used by the economics to determine the best price in the market by use of market equilibrium. The equilibrium point is a situation where the demand curve and supply curve intersect.  By interacting supply and demand the price of a product is arrived at and it’s called equilibrium price. There are some components in the market which prices depend on. The customer willingness to buy and sellers to an ability to sell is a determinant of price in the market.  Where there is an exchange of good and service a certain price must be agreed.

Determinant of oil global price by China

According to the author (Boqiang Lin1,2 and Jianglong Li2) China imports on oil have increased and this affects the future of oil pricing due to demand of oil. The price of the oil price determined by the producers and they use demand and supply curve to come up with final oil price. The demand of China has increased at a very high rate due to its level of industrialization and this has made China to be a determinant factor in the global oil market. The oil prices were determined by the forces of demand and supply for example 4.6 percent change have resulted in a big impact on oil pricing the China have the high influence on oil supply because the targeted revenue by oil producing countries needs to respond to the price of oil immediately. In most oil producing countries rely heavily on it in their budget so by China importing a lot of oil it will affect the oil producing country depending on where China is importing from. Some economics argue that global oil price has increased from the year 2003 and 2008 due to China demand rising very rapidly as compared with supply (Lin, 2015).

The reduction of supply of oil can affect China on its output due to inflation and other economic factors. The rise of demand for oil globally has positive results on output and rate of inflation (Lin, 2015). In short period the impact of oil price will be very small but in long run, it will be noticeable because China triggers oil price by 12.5 percent and this is more than 15.1 percent of all the increase in price which takes place, then it will contribute like 46percent after the financial crisis.

It is argued that in a market which is competitive the price of a certain product will vary as demand and supplies vary and will come in a position called equilibrium price that is a point where consumer demand quantity is equal to producers or suppliers supply quantity. If the demand for a certain commodity rises but the supply remain the same it will lead to equilibrium price to be higher. If the demand reduces but the supply remains the same it will lead to equilibrium price to below. If the supply of a commodity rises but demand remains static it will lead to high quantity and hence equilibrium price will be low. If the supply reduces but demand does not change the equilibrium price will rise and quantity will be lowered.

The economics argues that the consumers are the determinant as he has the collect information. For example, if the price of a given commodity rises and the consumer get that information his demand of that commodity will reduce and if price reduces demand goes up. If a supplier price is changed or lowered his or her product will be attractive, financial resources use will target a large number of customers hence can lead to expanding of item marketing. When the prices are lower the buyers will shift from competitors if a competitor cannot accommodate reduced price. If the prices reduction does not lead to increased demand the revenue will be reduced and this may cause a loss. The price can also be influenced by large company’s structure, if a firm operates in a very competitive environment it will use price reduction as a strategy so as to acquire big market share and if competition is less price reduction strategy will not be used in most cases.