I think there are multiple lines of thought to consider as a ref... personally I thinking where has the ball gone, how close are players from the other team (e.g. if the full back drops a catch and no one is near, I would stop quickly), and is there risk of danger. If the ball is loose, I want to see who picks it up and what happens next before I stop play, are the non-offending team close to the ball and might they play it, but I'd stop play if the person who knocked on is going to be hit late by an over enthusiastic defender.
I'll admit that as a player I was always looking for the counter attack, and as a ref at age-grade anything can and does happen, so I'm inclined to wait and see what develops rather than stop play quickly. However, I don't think play should always stop immediately just because the offending team is next to play the ball.
In the OP, the defending team were in close proximity, with a purple player quickly over the ball, therefore I would have been playing advantage which would have concluded in a penalty to purple.