Demand is one aspect of the market pricing process.

Demand is the quantity of goods that will be bought at an acceptable price in a certain period of time. The demand secured by the buyer's funds is called solvent.

Demand is influenced by many factors, the main of which is price. There is an inverse relationship between the price and the amount of demand: an increase in price reduces demand, and vice versa.

The inverse relationship between price and quantity demanded is called the law of demand.

This dependence can be depicted on the graph (Fig. 7.1) in the form of a demand curve d, where P (price) is the price, Q (quantity) is the quantity, the amount of demand, d (demand) is the demand.

Each dot on the vertical line represents a specific price, and on the horizontal line, the amount of a product that a consumer can buy at that price.

Rice. 7.1. Demand curve

Curve d 1 tilts down and to the right, since the relationship it depicts between price and the amount of demand is inverse. Graphically, the change in the value of demand is expressed in “ movement along the demand curve"(Points A, B, C). Movement along the demand curve occurs when the purchases of a product change due to a change in its price. In this case, they say that “ demand volume". It is necessary to distinguish between "movement along the demand curve" and " movement of the curve itself". "Traffic the demand curve itself»Occurs when the demand itself changes under the influence of non-price factors. In this case, one speaks of “ changing demand».

If, for example, consumers want to buy more of a given product at each price, then the demand curve will move to the right of d 1 to d 2. The desire to buy less goods, reduce demand and shift the demand curve to the left: from d 1 to d 3 .

conclusions

1. Movement "along the demand curve" and the change in "demand volume" occurs under the influence of the price of the goods.

2. The movement of "the demand curve itself" and "change in demand" occurs under the influence of non-price factors.

Non-price factors include:

Consumer tastes;

Number of buyers;

Buyers' income;

Prices for related goods;

Expectations.

Consider their impact on demand.

Consumer tastes are very subjective and difficult to take into account, but a trend can be identified: a change in consumer tastes favorable for a given product (for example, the fashion for T-shirts has increased) will increase demand and shift the demand curve to the right. The opposite situation (the fashion for T-shirts has passed) will reduce demand and shift the curve to the left.

An increase in the number of buyers will cause an increase in demand (for example, an increase in life expectancy will increase the demand for medicines). The opposite situation will reduce the demand for medicines.

Income affects more difficult. For most goods, higher incomes lead to increased demand for better quality goods.

According to the reaction (elasticity) of the consumer to a change in income, the goods are divided into:

"Normal" goods (demand increases with income);

essential goods (the growth rate of demand is less than the growth rate of income);

luxury goods (the growth rate of demand is greater than the growth rate of income);

goods of "inferior quality" (demand decreases with increasing income).

The relationship between income and the amount of purchased goods is reflected by Engel's curves (Fig. 7.2).

a) essential goods; b) luxury items; c) goods of "inferior quality"

Rice. 7.2. Engel curves

4. Prices for related goods. Products are usually grouped into two groups: substitute (substitutes) and complementary (sub-elements). They affect demand in different ways.

For example, tea is purchased instead of coffee if the price of coffee has increased.

Output. When two products are interchangeable, there is a direct relationship between the price of one of them and the demand for the other (rising coffee prices increase the demand for tea).

In contrast to interchangeable goods, complementary ones accompany each other in the sense that the demand for them is presented simultaneously. For example, buying a camera will entail buying a film. If the price of cameras rises, the demand for films will decrease.

Output. When two products are complementary, there is an inverse relationship between the price of one of them and the demand for the other.

5. Consumer expectations about future prices for goods, their availability and possible changes in incomes can change demand. If higher prices or higher incomes are expected, then consumers buy goods “for future use” and increase operating expenses.

On the contrary, the expectation of falling prices and falling incomes leads to a reduction in the current demand for goods.

To determine the sensitivity of one of the factors considered as a result of the impact on it of another, the concept of "elasticity" is used.

Of all the factors, the most interesting are the sensitivity of demand to price or income changes and cross (indirect) elasticity.

The price elasticity of demand shows how much the demand will change when the price changes by 1%. For example, you need to determine how much the amount of TV sales will change if its price has increased by 10%.

The income elasticity of demand shows how many percent the demand will change when consumer income changes by 1%. For example, it is necessary to determine how the demand for television will change if the income of the population increases by 12%.

The cross-elasticity of demand measures how sensitive the demand for product A is to changes in the price of product B.

The measure of elasticity is the coefficient of elasticity.

Consumer reactions to changes in the price of a product can be strong, weak or neutral. Each of them generates a corresponding demand: elastic, inelastic, unit elasticity.

Demand is elastic when, with a slight decrease in price, the volume of sales increases significantly. In elastic demand, when a 1% decrease in price causes an increase in sales by more than 1%, the elasticity coefficient is greater than one (basic necessities).

Demand is inelastic when the volume of sales does not change significantly with very significant price reductions. The coefficient of inelastic demand is less than one (luxury goods).

Demand has a unit elasticity where a 1% change in price causes a 1% change in sales of goods. With unit elasticity, the coefficient is equal to one.

The coefficient of elasticity in the mathematical sense always has a minus sign, since the price and the amount of sales change in the opposite direction. But for simplicity of analysis, Ked is considered a positive value.

The income elasticity of demand is expressed by the following formula:

Quality goods have a positive elasticity because income growth and demand for them change in the same direction. Low-quality goods - negative, as income growth reduces demand for them.

Now let's turn to the proposal.

Introduction

When describing the market, economists use the term “demand” to describe the behavior of buyers and the term “supply” to describe the behavior of sellers. The market is the interaction of buyers and sellers that determines the equilibrium price and the equilibrium quantity of the exchanged product.

To study the possible reaction of the consumer to certain price changes, the concept of “elasticity of demand” is used. This concept applies to both individual and market demand.

To determine the change in the level of volume and volume of sales at a certain point in time, the elasticity of the supply is used.

The aim of the course work is to study the elasticity of supply and demand.

Based on the set goal, it is necessary to solve the following tasks:

Consider the concept of supply and demand;

Determine the factors affecting supply and demand;

Describe the elasticity of supply and demand;

Examine the types of demand elasticities;

Describe the application of the theory of elasticity.

The object of study is the elasticity of supply and demand.

The theoretical and methodological basis of the course work was the works of scientists on economic theory, management, personnel management.

The informational basis was the data of the materials of the global Internet network.

The analysis used the methods and approaches of economic theory.

Product demand and elasticity

The concept of demand and its factors

demand elasticity supply economic

Demand refers to the quantity of a product that customers not only want but can buy at any possible price within a certain period of time. Demand (effective need), therefore, can be characterized as the relationship between the price and the amount of purchased goods.

Economists model demand, i.e. represent it as a model. Demand is considered as a function of many variables, the main of which is the market price of a product. It is common knowledge that the number of purchased goods depends on their price. The higher the price of a product, the less people want to buy it, and vice versa, the lower the price, the greater the volume of demand for it. Economists call this dependence the law of demand. The law of demand - other things being equal, the lower the price, the greater the amount of demand, and vice versa, the higher the price, the lower the amount of demand. Thus, there is an inverse relationship between price and demand.

The relationship between price and demand for any good can be illustrated using a demand curve. The demand curve is a graphical expression of the relationship between the price of a product and the amount of demand presented by buyers for this product.

The demand curve (D) is downward, downward. This "behavior" of the curve reflects the action of the law of demand, since the graph shows the inverse relationship between the price of goods X (Px) and the amount of demand for this good (Qx). In the figure below, a price drop from P1 to P2 leads to an increase in demand from Q1 to Q2.

Rice. 1.1. Demand curve

Considering the category “demand”, we focused on the influence of changes in the price of a product on the amount of demand. At the same time, it was assumed that only the price of the product changes, all other factors that can influence demand (consumer tastes, household income, prices for other goods, etc.) remain unchanged. But each of these factors affects the demand for good X, and under the influence of these factors, demand can change. In particular, with a constant market price of a product, consumers can demand more or less of it.

In the case when, under the influence of a change in some factor, the values ​​of demand change at each given price, the entire demand curve shifts to the right or to the left parallel to itself; they say that there has been a change in demand - demand has increased or decreased.

If the D0 curve shifts to the right, demand increases. If the D0 curve shifts to the left, then the demand will decrease. Non-price demand factors are otherwise called non-price demand determinants.

Rice. 1.2. Changes in demand under the influence of non-price factors

The following determinants have the most significant impact on the behavior of buyers, and therefore on the shift in the demand curve.

1. Tastes and preferences of consumers ”which, in turn, are determined by such factors as fashion, advertising, quality of consumed goods, customs, traditions, etc. If the tastes of consumers change in favor of a given product, then the demand for it will increase, and the demand curve will shift to the right.

2. The level of income of the population. An increase in consumer income leads to the fact that they demand more of this good at each price, i.e. demand rises and the demand curve shifts to the right from position D0 to position D1. Accordingly, a decrease in the income level of the population causes a decrease in demand and a shift in the demand curve to position D2.

3. Prices for other products may affect the change in demand for this product. In particular, we are talking about prices for interchangeable and mutually complementary goods. Interchangeable goods - goods that are similar in their consumer properties and can be replaced with each other. Imagine that the price of product Y, a substitute for X, has increased, then it is obvious that product X becomes relatively cheaper (compared to Y) and buyers will tend to purchase in large quantities of product X at every possible price, and the demand schedule for product X will shift to the right. Similarly, there is a shift in the demand schedule for product X to the left when the price of Y decreases. For example, tea and coffee are in some sense substitutes; as the price of coffee rises, the demand for tea increases. Thus, there is a direct relationship between the price of one of the interchangeable goods and the demand for another. Complementary goods - goods that cannot be used without each other (gasoline and a car, camera and film, tape recorder and cassettes). If product Z complements product X, then a decrease in the price of Z will entail an increase in demand for product X and a shift in the demand curve for it to the right, and an increase in price Z will cause the opposite effect, i.e. here the relationship between the price of one product and the demand for another is the opposite. Many goods are not related to each other, and a change in the price of one of them does not affect the demand for the other. Number of buyers. An increase in the number of buyers (for example, due to an increase in the population) will ultimately cause an increase in demand for the product.

4. Consumer expectations. If buyers expect changes in the prices of goods, an increase or decrease in their incomes, certain government actions affecting the availability of goods, then this may affect their desire to purchase the goods at the moment, and, therefore, cause a change in demand. Thus, expectations of a future increase in the price of a product (inflationary expectations) spur demand, i.e. consumers are eager to purchase goods in large quantities today, fearing they will lose the opportunity to buy them in the future when the price rises. Rush demand will result in the shift of the D chart to the right.

5. The effect of deferred demand is associated with the existence of cyclical fluctuations in demand over time - annual, quarterly, weekly fluctuations. So, during the year there are three "peaks" and three "dips" in demand. The first "peak" is late December - early January (New Year's holidays), followed by a drop in demand. The second "peak" - February - March - in Russia also falls on holidays (February 23, March 8). The third "peak" usually falls on August - September (the period of mass vacations, the time of preparation for the new academic year). The cyclical nature also exists during the month - there are two "peaks" - advance payment and salary. During the week, an increase in demand is observed before the weekend.

So, demand is influenced by both price and non-price factors. In this regard, one should not confuse changes in demand that occur under the influence of price and non-price factors. With a change in demand, a shift in the demand curve occurs, since in this case, at each price, demand is presented for a different (more or less) quantity of goods. Changes in demand can only occur if the non-price determinants of demand change. When all the non-price factors are constant and do not change, and the price of the goods either increases or decreases, then we pass from one ratio "price-quantity of the requested product", all other things being equal, according to the law of demand, to another, new ratio of "price-quantity of the requested product. ". Accordingly, when the price decreases from P1 to P2, the same demand curve shifts from point A to point B. In such cases, due to the action of the law of demand, there is only a change in the value (volume) of demand, movement along the demand curve.

Market Mechanism- it is a mechanism of interconnection and interaction of the main elements of the market - demand, supply, prices, and the main market.

The market mechanism operates on the basis of economic laws. Change in demand, change in supply, change, value, utility and profit. allows you to satisfy only those and societies that are expressed through demand.

Demand law

Demand Is a solvent need for a product or service.

Demand value Is the quantity and that buyers are willing to purchase at a given time, at a given place, at given prices.

The need for some good implies the desire to possess goods. Demand presupposes not only desire, but also the possibility of acquiring it at prices existing on the market.

Types of demand:

• (Production demand)

Factors affecting demand

The amount of demand is influenced by a huge number of factors (determinants). Demand depends on:

• use of advertising
• fashions and tastes
• consumer expectations
• changes in environmental preferences
• availability of goods
• incomes
• usefulness of things
• prices set for interchangeable goods
• and also depends on the size of the population.

The maximum price that buyers are willing to pay for a certain amount of a given product or service is called at the cost of demand(denote)

Distinguish exogenous and endogenous demand.

Exogenous demand - it is such a demand, the changes of which are caused by government intervention, or the introduction of any forces from the outside.

Endogenous demand(domestic demand) - formed within society due to the factors that exist in this society.

The relationship between the amount of demand and its determining factors is called the demand function.
In its most general form, it is written as follows where:

If all the factors determining the amount of demand are considered unchanged for a given period of time, then we can go from the general demand function to price demand functions:... The graphical representation of the demand function from the price on the coordinate plane is called demand curve(picture below).

Changes in the market associated with the quantitative supply of a product always depend on the price set for this product. There is always a certain ratio between the market price of a commodity and the quantity for which demand is presented. The high price of goods limits the demand for it, a decrease in the price of this product usually characterizes an increase in demand for it.

Today, almost every developed country in the world is characterized by a market economy in which state intervention is minimal or absent. Prices for goods, their assortment, production and sales volumes - all this develops spontaneously as a result of the work of market mechanisms, the most important of which are supply and demand law... Therefore, let us consider at least briefly the basic concepts of economic theory in this area: supply and demand, their elasticity, demand curve and supply curve, as well as their determining factors, market equilibrium.

Demand: concept, function, schedule

Very often we hear (see) that concepts such as demand and the amount of demand are confused, considering them synonymous. This is wrong - demand and its value (volume) are completely different concepts! Let's consider them.

Demand (English "Demand") - the solvent need of buyers for a certain product at a certain price level for it.

Demand value(demand volume) - the amount of goods that buyers want and can purchase at a given price.

So, demand is the need of buyers for a certain product, provided by their ability to pay (that is, they have money to satisfy their need). And the amount of demand is a specific amount of goods that buyers want and can (they have money for) buy.

Example: Dasha wants apples and she has money to buy them - this is demand. Dasha goes to the store and buys 3 apples, because she wants to buy exactly 3 apples and she has enough money for this purchase - this is the amount (volume) of demand.

There are the following types of demand:

• individual demand- an individual specific buyer;
• total (aggregate) demand- all buyers available on the market.

Demand, the relationship between its value and price (as well as other factors) can be expressed mathematically, in the form of a demand function and a demand curve (graphical interpretation).

Demand function- the law of the dependence of the magnitude of demand on various factors influencing it.

- a graphical expression of the dependence of the value of demand for a certain product on the price of it.

In the simplest case, the demand function is the dependence of its value on one price factor:

P is the price for this product.

The graphical expression of this function (demand curve) is a straight line with a negative slope. A typical linear equation describes such a demand curve:

where: Q D - the amount of demand for this product;
P is the price for this product;
a - coefficient specifying the displacement of the beginning of the line along the abscissa axis (X);
b - coefficient specifying the angle of inclination of the line (negative number).

Linear demand graph expresses the inverse relationship between the price of a product (P) and the number of purchases of this product (Q)

But, in reality, of course, everything is much more complicated and the amount of demand is influenced not only by the price, but also by many non-price factors. In this case, the demand function takes the following form:

where: Q D - the amount of demand for this product;
P X - the price of this product;
P is the price of other related goods (substitutes, supplements);
I - buyers' income;
E - buyers' expectations regarding price increases in the future;
N is the number of potential buyers in a given region;
T - tastes and preferences of buyers (habits, adherence to fashion, traditions, etc.);
and other factors.

Graphically, such a demand curve can be represented as an arc, but this is again a simplification - in reality, the demand graph can have any of the most bizarre shapes.

In reality, demand depends on many factors and the dependence of its value on price is non-linear.

Thus, factors affecting demand:
1. Price factor of demand- the price of this product;
2. Non-price factors of demand:

• the presence of interconnected goods (substitutes, complements);
• the level of buyers' income (their ability to pay);
• the number of buyers in a given region;
• tastes and preferences of buyers;
• customer expectations (regarding price increases, future needs, etc.);
• other factors.

Demand law

To understand market mechanisms, it is very important to know the basic laws of the market, which include the law of supply and demand.

Demand law- with an increase in the price of a product, the demand for it decreases, with other factors unchanged, and vice versa.

Mathematically, the law of demand means that there is an inverse relationship between the amount of demand and the price.

From a philistine point of view, the law of demand is completely logical - the lower the price of a product, the more attractive its purchase and the more units of the product will be bought. But, oddly enough, there are paradoxical situations in which the law of demand fails and acts in the opposite direction. This is manifested in the fact that the amount of demand increases as the price rises! Examples are the Veblen effect or Giffen's products.

The law of demand has theoretical background... It is based on the following mechanisms:
1. The income effect- the desire of the buyer to purchase a larger amount of this product while reducing the price of it, while not reducing the volume of consumption of other goods.
2. Substitution effect- the willingness of the buyer to give preference to him when the price of a given product decreases, abandoning other more expensive goods.
3. The law of diminishing marginal utility- as this product is consumed, each additional unit will bring less and less satisfaction (the product is "boring"). Therefore, the consumer will be ready to continue buying this product only if its price decreases.

Thus, a change in price (price factor) leads to changes in demand... Graphically, this is expressed in moving along the demand curve.

Change in the value of demand on the graph: moving along the line of demand from D to D1 - an increase in the volume of demand; from D to D2 - decrease in demand

The impact of other (non-price) factors leads to a shift in the demand curve - changes in demand. With an increase in demand, the graph shifts to the right and up, with a decrease in demand - to the left and down. Growth is called - expansion of demand, decrease - narrowing demand.

Change in demand on the chart: shift of the demand line from D to D1 - narrowing of demand; from D to D2 - demand expansion

Elasticity of demand

With an increase in the price of a product, the amount of demand for it decreases. When the price goes down, it increases. But this happens in different ways: in some cases, a slight fluctuation in the price level can cause a sharp rise (fall) in demand, in others, a price change over a very wide range will practically not affect demand in any way. The degree of this dependence, the sensitivity of the amount of demand to price changes or other factors is called the elasticity of demand.

Elasticity of demand- the degree of change in the value of demand when the price (or other factor) changes in response to a change in price or other factor.

A numerical indicator reflecting the degree of such a change - coefficient of elasticity of demand.

Respectively, price elasticity of demand shows how much the volume of demand will change when the price changes by 1%.

Arc Price Elasticity of Demand- used when you need to calculate the approximate elasticity of demand between two points on the arc demand curve. The more convex the demand arc is, the higher the error in determining the elasticity will be.

where: E P D - price elasticity of demand;
P 1 - the original price of the product;
Q 1 - the initial value of the demand for the product;
P 2 - new price;
Q 2 - the new value of demand;
ΔP - price increment;
ΔQ is the increment in the amount of demand;
P cf. - average prices;
Q av. Is the average demand.

Point price elasticity of demand- it is applied when the demand function is set and there are values ​​of the initial demand value and the price level. It characterizes the relative change in the value of demand with an infinitely small change in price.

where: dQ is the demand value differential;
dP - price differential;
P 1, Q 1 - the value of the price and the amount of demand at the analyzed point.

The elasticity of demand can be calculated not only by price, but, for example, by the income of buyers, as well as by other factors. There is also cross-elasticity of demand. But we will not consider this topic so deeply here, a separate article will be devoted to it.

Depending on the absolute value of the elasticity coefficient, the following types of demand are distinguished ( types of demand elasticities):

• Perfectly inelastic demand or absolute inelasticity (| E | = 0). When the price changes, the amount of demand remains practically unchanged. Essential goods (bread, salt, medicine) are close examples. But in reality there are no goods with completely inelastic demand for them;
• Inelastic demand (0 < |E| < 1). Величина спроса меняется в меньшей степени, чем цена. Примеры: товары повседневного спроса; товары, не имеющие аналогов.
• Unit Elasticity Demand or unit elasticity (| E | = -1). Price and demand changes are fully proportional. The volume of demand rises (falls) at exactly the same rate as the price.
• Elastic demand (1 < |E| < ∞). Величина спроса изменяется в большей степени, чем цена. Примеры: товары, имеющие аналоги; предметы роскоши.
• Perfectly elastic demand or absolute elasticity (| E | = ∞). A slight change in price immediately increases (decreases) the volume of demand by an unlimited amount. In reality, there is no product with absolute elasticity. A more or less close example: liquid financial instruments traded on an exchange (for example, currency pairs on Forex), when a small price fluctuation can cause a sharp rise or fall in demand.

Sentence: concept, function, schedule

Now let's talk about another market phenomenon, without which demand is impossible, its inseparable companion and opposing force - supply. Here, one should also distinguish between the offer itself and its size (volume).

Offer (English "Supply") - the ability and willingness of sellers to sell a product at a given price.

Amount of supply(supply volume) - the amount of goods that sellers want and can sell at a given price.

Distinguish the following types of offer:

• individual offer- a specific individual seller;
• total (aggregate) supply- all sellers present on the market.

Suggestion function- the law of the dependence of the amount of supply on various factors influencing it.

- a graphical expression of the dependence of the value of the offer for a certain product on the price for it.

Simplified, the supply function is the dependence of its value on the price (price factor):

P is the price for this product.

The supply curve in this case is a straight line with a positive slope. The following linear equation describes this supply curve:

where: Q S - the amount of supply for this product;
P is the price for this product;
c - coefficient specifying the displacement of the beginning of the line along the abscissa axis (X);
d - coefficient specifying the angle of inclination of the line.

The line supply graph expresses a direct relationship between the price of a product (P) and the number of purchases of this product (Q)

The supply function, in its more complex form, taking into account influence and non-price factors, is presented below:

where Q S is the amount of supply;
P X - the price of this product;
P 1 ... P n - prices of other interconnected goods (substitutes, complements);
R - availability and nature of production resources;
K - applied technologies;
C - taxes and subsidies;
X - natural and climatic conditions;
and other factors.

In this case, the supply curve will be in the form of an arc (although this is again a simplification).

In real conditions, the supply depends on many factors and the dependence of the supply volume on the price is non-linear.

Thus, factors influencing the supply:
1. Price factor- the price of this product;
2. Non-price factors:

• availability of complementary and substitute goods;
• the level of technology development;
• the amount and availability of the required resources;
• natural conditions;
• expectations of sellers (producers): social, political, inflationary;
• taxes and subsidies;
• the type of market and its capacity;
• other factors.

Supply law

Supply law- with an increase in the price of a product, the supply for it increases, with other factors unchanged, and vice versa.

Mathematically, the law of supply means that there is a direct relationship between the amount of supply and the price.

The law of supply, like the law of demand, is very logical. Naturally, any seller (manufacturer) strives to offer his goods at a higher price. If the price level in the market rises, it is profitable for sellers to sell more, if it falls, it is not.

A change in the price of a product leads to changes in supply... On the chart, this is manifested by movement along the supply curve.

Change in the amount of supply on the chart: movement along the supply line from S to S1 - an increase in the supply volume; from S to S2 - decrease in supply volume

A change in non-price factors leads to a shift in the supply curve ( changing the proposal itself). Expansion of the offer- shift of the supply curve to the right and down. Narrowing the offer- shift to the left and up.

Change in supply on the chart: shift of the supply line from S to S1 - supply narrowing; from S to S2 - offer extension

Elasticity of supply

Supply, like demand, may vary to a varying degree depending on price changes and other factors. In this case, one speaks of the elasticity of the proposal.

Elasticity of supply- the degree of change in the amount of supply (the number of offered goods) in response to a change in price or other factor.

A numerical indicator reflecting the degree of such a change - supply elasticity coefficient.

Respectively, price elasticity of supply shows how much the supply value will change when the price changes by 1%.

The formulas for calculating the arc and point elasticity of supply with respect to price (Eps) are completely analogous to the formulas for demand.

Types of supply elasticity by price:

• absolutely inelastic offer(| E | = 0). The price change does not affect the value of the supply at all. This is possible in the short term;
• inelastic offer (0 < |E| < 1). Величина предложения изменяется в меньшей степени, чем цена. Присуще краткосрочному периоду;
• single elasticity proposal(| E | = 1);
• flexible offer (1 < |E| < ∞). Величина предложения изменяется в большей степени, чем соответствующее изменение цены. Характерно для долгосрочного периода;
• absolutely flexible offer(| E | = ∞). The amount of supply changes infinitely with a slight change in price. Also typical for the long term.

It is noteworthy that situations with perfectly elastic and completely inelastic supply are quite real (in contrast to similar types of demand elasticities) and are encountered in practice.

Supply and demand "meet" in the market, interact with each other. In free market relations without strict government regulation, they will sooner or later balance each other (the French economist of the 18th century spoke about this). This state is called market equilibrium.

- market situation in which demand is equal to supply.

Market equilibrium is graphically expressed market equilibrium point- the point of intersection of the demand curve and the supply curve.

If supply and demand do not change, the market equilibrium point tends to remain unchanged.

The price corresponding to the market equilibrium point is called equilibrium price, quantity of goods - equilibrium volume.

Market equilibrium is graphically expressed by the intersection of the demand (D) and supply (S) graphs at one point. This point of market equilibrium corresponds to: P E - equilibrium price, and Q E - equilibrium volume.

There are different theories and approaches explaining how exactly market equilibrium is established. The most famous are the approach of L. Walras and A. Marshall. But this, as well as the cobweb-like model of equilibrium, the seller's market and the buyer's market, is a topic for a separate article.

If very succinctly and simplified, then the mechanism of market equilibrium can be explained as follows. At the equilibrium point, everyone (both buyers and sellers) is happy. If one of the parties gains an advantage (the market deviates from the equilibrium point in one direction or the other), the other side will be unhappy and the first party will have to make concessions.

For example: the price is higher than the equilibrium one. It is profitable for sellers to sell goods at a higher price and the supply rises, there is a surplus of goods. And buyers will be unhappy with the rise in the price of the product. In addition, the competition is high, the supply is excessive and sellers, in order to sell the goods, will have to reduce the price until it comes to an equilibrium value. At the same time, the supply volume will also decrease to the equilibrium volume.

Or other example: the volume of goods offered on the market is less than the equilibrium volume. That is, there is a shortage of goods on the market. In such conditions, buyers are willing to pay a higher price for the product than that at which it is currently being sold. This will encourage sellers to increase their supply while increasing prices. As a result, the price and volume of demand / supply will come to an equilibrium value.

In fact, this was an illustration of the theories of market equilibrium by Walras and Marshall, but as already mentioned, we will consider them in more detail in another article.

Galyautdinov R.R.

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Demand Is the amount of goods that buyers want and can purchase for a certain period of time at all possible prices for this product.

The so-called the law of demand, the essence of which can be expressed as follows: all other things being equal, the value of demand for a product is the higher, the lower the price of this product, and vice versa, the higher the price, the lower the value of demand for the product. The operation of the law of demand is explained by the existence of the income effect and the substitution effect. The income effect is expressed in the fact that when the price of a product decreases, the consumer feels richer and wants to buy more of the product. The substitution effect consists in the fact that when the price of a product decreases, the consumer seeks to replace this cheaper product with others whose prices have not changed.

The concept of "demand" reflects not only the desire, but also the ability to purchase a product, ie, as a rule, it implies not just a need for a product, but an effective demand for this product. If there is a need for a product, but there is no opportunity to purchase the product, then there is no demand (effective demand) for this product. For example, a certain consumer has a desire to buy a car for 1 million rubles, but he does not have such an amount. In this case, we have a desire, but we do not have the opportunity to pay, so there is no demand for a car from this consumer.

The law of demand is limited in the following cases:

• in case of rush demand caused by the expectation of buyers of price increases;
• for some rare and expensive goods, the purchase of which remains a means of accumulation (gold, silver, precious stones, antiques, etc.);
• when demand is switched to newer and higher quality products (for example, when demand is switched from typewriters to home computers, lower prices for typewriters will not increase demand for them).

The change in the quantity of goods that buyers want and can purchase, depending on the change in the price of this product, is called changes in the amount of demand. In fig. 4.1 graphically depicts the relationship between the price of a vacuum cleaner and the amount of demand for it. A change in the amount of demand is a movement along the demand curve.

Rice. 4.1.

D (eng. demand ) - demand; R (eng. price ) - price; Q (eng. Quantity ) - the amount of demand

If the price of a vacuum cleaner drops from 30 to 20 thousand rubles, then the value of demand for it will increase from 200 to 400 pcs. daily and vice versa.

However, price is not the only factor influencing the willingness and willingness of consumers to purchase a product. Changes caused by the influence of all factors other than price are called changes in demand. All these and other factors (the so-called non-price) act both in the direction of an increase and in the direction of a decrease in demand.

Non-price factors include changes:

• in the income of the population. If the income of the population grows, then the buyers have a desire to purchase more goods, regardless of their prices. For example, there is a growing demand for high quality clothing and footwear, durable goods, real estate, etc .;
• in the structure of the population. For example, an increase in fertility leads to an increase in the demand for baby products; the aging of the population entails an increase in the demand for medicines, items of care for the elderly;
• prices for other goods. For example, an increase in prices for beef may lead to an increase in demand for a substitute product - poultry meat, etc .;
• consumer tastes, fashion, habits, etc. and other factors not related to price;
• in the expectations of buyers. So, if they expect that soon the price of the product will decrease, then at the moment they can reduce their demand.

In fig. 4.2 The influence of non-price factors on demand can be depicted as a shift in the demand curve to the right (growth in demand) or to the left (decline in demand).

Rice. 4.2.

D, D1, D2 - polls respectively initial, increased, decreased

What is an offer?

Offer - it is the quantity of goods that sellers want and can offer for a certain period of time at all possible prices for this product.

Supply law consists in the fact that, other things being equal, the quantity of goods offered by sellers is the higher, the higher the price of this product, and vice versa, the lower the price, the lower the value of its supply.

In fig. 4.3 graphically depicts the relationship between the price of a product and the amount that sellers are ready to offer for sale. Moving along the supply curve is called a change in supply. If the price of a vacuum cleaner rises from 20 to 30 thousand rubles, then the number of offered vacuum cleaners will increase from 200 to 400 pcs. daily and vice versa.

Rice. 4.3.

S (eng. supply ) - offer; R - price; Q - supply value

In addition to the offer price, non-price factors also affect, among which the following stand out:

• changes in the costs of the firm. Reducing costs as a result of, for example, technical innovations or lower prices for raw materials and supplies leads to an increase in supply. Conversely, increases in costs as a result of higher raw material prices or additional taxes on producers cause a decrease in supply;
• tax cuts for producers. Helps to stimulate the growth of supply, on the contrary, a decrease in subsidies from the state can lead to a decrease in supply;
• increase (reduction ) the number of firms in the industry. Leads to an increase (decrease) in supply.

In fig. 4.4 the influence of non-price factors on supply is depicted as a shift of the supply curve to the right (supply growth) or to the left (supply decrease). In this case, they talk about a change in the proposal.

Rice. 4.4.

S, S1, S2 - supply respectively initial, increased, decreased