Kendyl Wright
Quiz 4
10/3/2016
Reading Summary #1
In chapter three (The Market Process) of Holcombe’s text he touches on the two
perspectives of economic analysis. He makes a claim that the most natural perspective is
the market process perspective because it “perceives actual economic activities that take
place” (Holcombe, 32). In this perspective economists partake in exchanges with the idea
of improving their self economically. They want to understand the relation between
production and exchanges. Whereas the equilibrium approach gives a different view of the
end result after exchanges are made when there is a profit.
Holcombe says that having an understanding of the equilibrium framework helps
economists understand what causes prosperity and how to help with further developing the
economic welfare. Market clearing is the idea by which the supply of an economic market
is in equilibrium with the demand of that supply in which there is no leftover of neither
supply nor demand. This idea of market clearing ties in with the of an equilibrium price. In
this theory the idea is that the market will always tend to fluctuate towards this equilibrium
price. This idea also doesn’t change when dealing with a market that continually has a
supply and demand, the idea is that the supply and demand will always hit an equilibrium
no matter the product being sold or the type of market it is sold on. When a sale price
exceeds a market clearing price, the supply will then be higher then the demand.