The main parameters of any market are: demand, offer And price. Let's start by looking at demand. Everyone could be convinced that the quantity of goods purchased by people always depends on the price: the higher the price of a product, the less it is bought, and the lower its market price, the more units of this product will be purchased, other things being equal.

Thus, there is always a certain relationship between the market price of a product and the quantity for which there is demand. This relationship between price and quantity purchased is called law of demand. In graphical form, the law of demand can be presented as follows (see Fig. 1).

The demand curve is usually denoted by the letter d (from the English demand - demand). It shows that the quantity of goods Q purchased and its price P are, as a rule, inversely proportional: when the price falls, the number of purchases increases. Thus, we can formulate the law of demand as follows: If the price of a good rises, then less of that good will be demanded. It is assumed that all other conditions - income and tastes of consumers, prices for interchangeable goods, etc. remain unchanged.

Theoretically, however, a version of the demand curve that has an “increasing” form is also possible (as in Chart 2). In this case we are talking about the so-called “inferior” goods, i.e. those that have no substitute products (or substitute goods), the demand for which falls with increasing income (for example, traveling by bus with increasing income is replaced by traveling by car). Bread, potatoes, sausage are inferior products.

Goods for which demand increases even as their price increases are called Giffen goods, named after Robert Giffen (1837-1910), English economist. This name is due to the following circumstances: in 1848 there was a famine in Ireland and people ate mainly potatoes, which are an inferior commodity. Potato prices were constantly increasing, as a result of which people were forced to give up other products and benefits and direct all their income to the purchase of potatoes, i.e. The demand curve for potatoes was upward sloping during that period.

After we have characterized the demand presented by buyers, let's turn to the other side - the sellers. Let us dwell on the supply schedule, which is understood as the corresponding relationship between market prices and the quantity of products that producers express their readiness to produce and sell. Unlike the demand curve, the supply curve usually rises to the right (see Fig. 3).

Respectively, law of supply can be formulated like this: The higher the market prices for any product, the greater the quantity of this product that producers and sellers are willing to supply to the market. .

In order to establish how it is determined equilibrium market price, it is necessary to combine demand analysis with supply analysis. Figure 4 shows this in graphical form.

At point C, the quantity supplied is equal to the quantity demanded. At a lower price P, excess demand will again push the price up, and at a price higher than the equilibrium price, supply will be excessive and the price will decline.

Analysis of the situation of market equilibrium, surplus and

Interaction of supply and demand.

The main factor in changes in supply and demand is price. Sellers and buyers, focusing on prices, develop plans for their behavior, and in accordance with them make their decisions about buying and selling goods. However, when they meet on the market, it turns out that as a result of coordination, supply and demand can change their price and lead it to a compromise agreement, i.e. to the market price.

Market price – this is the price of a compromise, an agreement between the seller and the buyer, the price, at which the product is actually bought and sold. Market price is also called at the cost of balance, since it is at that level of equilibrium when the seller still agrees to sell, and the buyer already agrees to buy the product.

In the process of interaction between sellers and buyers, it is possible three options for market equilibrium:

1. Supply of goods exceeds customer demand. This situation may result from:

· excess production of goods;

· their quality is not high;

· exorbitantly high prices for them, which have come up against the low purchasing power of buyers. The resulting discrepancy, as a rule, leads to crisis situations. The solution to this problem could be: lowering prices, reducing production volumes, improving the quality of products, improving distribution relations and regulating income.

2. Demand exceeds supply . Unsatisfied consumer demand is the result of exorbitant price increases. People are looking for an application for their money. As a result, intense competition arises between buyers for the right to purchase missing goods. Prices for goods are rising. In this fight, those buyers who have higher incomes win.

3. Equilibrium of supply and demand . It characterizes the general and particular correspondence between the volume and structure of demand for goods, on the one hand, and the volume and structure of supply, on the other, as a result of which they are balanced.

The created equilibrium indicates that the market offers so many goods and in such an assortment that fully satisfy demand and are available to the buyer at the prices offered. But, as a rule, such correspondence is practically rare. Manufacturers usually differentiate goods by offering them for sale at different prices, based on different levels of purchasing power, so for the same product in the sales market there are as many points of balance between supply and demand as there are correspondences between them.

To establish the market price, we combine the previously discussed demand (Fig. 6.1.1.) and supply (Fig. 6.2.1.) schedules. Both of these graphs depict in each case the quantity of goods depending on the price level (Fig. 6.3.1.).

The level of intersection of the supply and demand curves (point A) determines the level of the market price. Point A is called the equilibrium point, and the price (F) is called the equilibrium point. This is truly a balancing price, because any other point of intersection of the curves means a disproportion between effective demand and the corresponding supply of goods.

If market the price will fall below the equilibrium , will decrease to level (K), then the number of buyers will increase at the expense of those individuals who were unable to reach the price at the level of point F. Consequently, the quantity of demand will also increase (before OE). But a decrease in the market price (from F to K) will reduce the number of sellers at the expense of those for whom this price is unacceptable, since it does not even reimburse costs.

6.3.1. Equilibrium price.

As a result increased demand (OE) will be opposed by a much smaller supply of goods (OL). Arises commodity shortage (in Fig. 4 it is equal to segment LE).

When under the influence of demand, the market price will increase equilibrium and rises to level (R), then the number of sellers will increase at the expense of those who have high costs. Hence, the quantity of supply will also increase(DE will be added to OD). But now the increase in market price (from F to R ) will reduce the number of buyers (from OD to OL) at the expense of those for whom this price will become unaffordable. As a result, the increased supply (OE) will be opposed by a much smaller solvent number of buyers (OL). Overproduction occurs , surplus of goods (in Fig. 6.3.1 it is equal to the segment LE).

Thus, equilibrium price is the price at which the quantity demanded coincides with the quantity supplied. If the price rises above the equilibrium point, it will stimulate an increase in production, which will lead to an increase in commodity supply and the price of goods will begin to decline, approaching the equilibrium point. A decrease in price, in turn, increasing consumer demand, will contribute to the expansion of production and a return to the equilibrium point.

Thus, in the market there is a competitive struggle between the seller and the buyer for a price that is more favorable to each of them. As a result of this struggle, the price is balanced, i.e. fixed at a point where the interests of the buyer and the interests of the seller coincide.

It should be noted that the movement of the equilibrium price up or down, i.e. upward or downward, directly affects the well-being of various population groups. Therefore, sometimes the state tries to intervene in the process of market pricing using administrative methods, which most often comes down to setting prices at a level below market equilibrium. As practice shows, through government intervention in the pricing mechanism it has not yet been possible to solve a single problem, both in the economic and social spheres. State control over prices leads to artificial regulation of supply and demand. Setting prices for goods below the equilibrium price creates a market environment that is unfavorable for the producer: the production of goods is low-profit or unprofitable. A commodity shortage arises, and, as a result, goods go into the shadow economy, where their prices are not only higher than the state ones, but also higher than the equilibrium price. Moreover, the turnover of such goods does not allow them to be taxed, and this entails a reduction in state revenues. In the conditions of such management, low-income strata of society are not only not protected by the state, but are even further drawn into the quagmire of economic turmoil: shadow goods become inaccessible to them, and the shortage of essential goods generally gives rise to an ugly system of distribution of material goods with the help of cards, coupons, coupons, etc. .P. The budget deficit due to the concealment of income by shadow structures further increases the social insecurity of those whom the state is supposed to protect.

Demand(D, demand) is the desire and ability of buyers (consumers) to purchase goods or services. Distinguish between individual and market. The demand of an individual consumer in the market is called individual. Market demand is the sum of the individual demands of all consumers of a given product. Quantity of demand shows the relationship between a given price and the quantity of the product being purchased. The relationship between the concepts of “demand” and “quantity of demand” is clearly shown by the graph of the demand curve (Fig. 3-2).

If we plot all possible quantities of the purchased product along the x-axis, and all possible price options for it along the ordinate axis, we obtain a demand curve - D0, as a set of points that expresses all possible combinations of prices and quantities of the purchased product in a given period. Each point on the demand curve shows a certain quantity demanded, that is, the amount of a good that buyers are willing and able to buy at a given price. All other things being equal, a decrease in price causes an increase in the quantity demanded of a product, and vice versa. Law of Demand expresses the inverse relationship between the price of a product and the quantity demanded for it.

The relationship between the quantity demanded of a good and its price can be explained by the income effect and the substitution effect. Income effect consists in the fact that when the price decreases (which is equivalent to an increase in income), the product becomes cheaper relative to the total amount of income and therefore it can be bought in larger quantities without denying oneself the purchase of other goods. Substitution effect means that when the price decreases, there is an incentive to buy this product instead of similar others, which have become relatively more expensive (if beef has fallen in price, then the demand for lamb, pork, fish, poultry will decrease, since more beef will be purchased). The income effect and the substitution effect determine the downward sloping nature of the demand curve, i.e., as the price decreases, the quantity demanded increases.

In addition to the price of a given product, demand is affected by others, non-price factors, which characterize the consumers of this product. Non-price factors of demand include consumer tastes and preferences, the number of consumers in the market, income, prices for other goods, consumer expectations. Non-price factors change demand, increasing or decreasing it. This means that at the same price of a product, buyers are willing to buy more or less of it, or that they are willing to buy the same quantity of a product at a higher (lower) price. The change in demand on the graph is expressed as shift demand curve: with increasing demand - up and to the right, from D 0 to D 1 , and when demand decreases, down and to the left, from D 0 to D 2 (Fig. 3-2).

Rice. 3-2. Demand curves

Let us consider in more detail the influence of consumer income and prices of other goods on demand. Changes in consumer income affect demand, but the direction of change depends on the product category. In highly developed countries there are normal goods, consumed by the bulk of the population, and low category goods, intended for the poor and low-income.

The relationship between changes in demand for goods of normal quality (for example, a new car, vacation expenses) and changes in income is direct, but in the case of goods of the lowest category it is inverse. As income increases, demand for them decreases, and vice versa.

Prices for other goods, influencing consumer behavior, also change demand. The direction of change depends on the type of product, whether it is complementary or interchangeable. Complementary (related) goods - These are goods that are consumed together. The relationship between the demand for a given product and the price of the associated product is inverse. If, for example, the prices of VCRs rise sharply, then the demand for video cassettes will fall.

Fungible goods can be used in place of one another. The relationship between a change in the price of an interchangeable product and a change in demand for this product is direct. If the price of poultry falls, then, other things being equal, the demand for beef will decrease.

Supply, factors influencing it. Law of supply.

Offer(S, supply) shows the desire and ability of producers-sellers to supply goods or services to the market at any of the possible prices in a given period of time. Just as in the case of demand, it is necessary to distinguish between the concepts of “individual supply” and “market supply”, “supply” and “quantity of supply”. Supply quantity shows the relationship between a given price and a given quantity supplied.

If the quantity of demand is inversely related to the yen of a product, then there is a direct relationship between the price and the quantity of supply: if the price rises, then, other things being equal, more of this product will enter the market, since it is profitable for the manufacturer to increase its production and vice versa. Law of supply expresses the direct relationship between price and quantity supplied of a product.

The supply curve S 0 on the graph (Fig. 3-3) shows all possible combinations of prices and quantities of goods supplied, all other things being equal. According to the law of supply, it has an ascending character.

Rice. 3-3. Supply curves

In addition to the price of a given product, the supply is influenced by the following non-price factors:

1) prices for resources, the relationship between prices for resources and supply is direct. A decrease in prices for resources will reduce the cost of producing a unit of goods (average costs), so for producers the supply of this product to the market will become profitable and supply will increase. Rising prices for resources, increasing production costs, reduces the supply of goods;

2) production technology. The introduction of advanced technologies, reducing average production costs, increases supply;

3) taxes and subsidies. High taxes reduce supply, and subsidies and preferential loans, if used effectively, can stimulate the growth of production and supply;

4) number of producers. There is a direct relationship between the number of sellers and supply in the market;

5) price expectations of sellers also influence supply. If prices for a given product are expected to increase, then producers will hold it at the moment and vice versa. Changes in supply under the influence of non-price factors, among which the change in average production costs (resource prices, economics of production, taxes and benefits) are of decisive importance, is shown in Fig. 3-3. An increase in supply leads to a downward shift to the left of the supply curve from S 0 to S 1 and a decrease in supply leads to a shift to the right, upward from S 0 to S 2 .

Elasticity of supply and demand.

The degree of sensitivity of demand (or supply) for a product to changes in its price is called elasticity of demand(offers). It varies from product to product and can be measured using the elasticity coefficient.

Elasticity coefficient(E - elasticity) shows by what percentage the quantity demanded (or supplied) for a given product changes when its price changes by one percent.

If this ratio is greater than one, demand is considered elastic, if less than one, demand is considered inelastic. With unit elasticity of demand, Ed is equal to one. If a change in price does not change the quantity demanded at all, then completely inelastic demand occurs. When, at a constant price, the quantity demanded constantly increases, perfect elasticity of demand is observed.

Different options for elasticity of demand can be represented in traffic (Fig. 3-4). Curve A shows inelastic demand, curve B shows unit elasticity, and curve C shows elastic demand. The elastic demand curve C is flatter than the inelastic demand line A. Moreover, any demand is more elastic in the area of ​​high prices and low volumes of demand and inelastic in the area of ​​low prices and large possible sales. (The horizontal straight line N represents perfectly elastic demand, and the vertical straight line M represents perfectly inelastic demand).

Rice. 3-4. Elasticity of demand

An example of inelastic (weakly elastic) demand is the demand for medicines, drugs, and many essential goods (for example, bread): no matter how the price of these goods changes, the demand for them changes little or does not change at all. Therefore, an increase in price leads to an increase in gross revenue - the product of price and sales volume, and vice versa (Fig. 3-5, A).

With unit elasticity of demand, a change in price does not lead to a change in revenue, since the decrease in price is compensated by the same increase in the sales volume of the product (Fig. 3-5, B). If the demand for a given product is elastic, that is, a small decrease in the price of a product causes a larger increase in the quantity demanded, then the firm will not lose from such a decrease and will ultimately receive more income. Consequently, with elastic demand, price and revenue change in opposite directions, and with inelastic demand - in the same direction (3-5, C).

The concept of elasticity is also applicable to the study of product supply. Changes in supply are determined by difficulties in redistributing resources between industries, which is associated with the time factor: supply is less elastic in the short term and more elastic over a long period, when it is possible to adapt to the changed market situation.

Rice. 3-5. The impact of demand elasticity on total revenue

The elasticity of demand for goods is important for practice; this issue is carefully studied and taken into account in the market strategy of any company.

2) Basic concepts
Law of supply and demand- objective economic law , establishing the dependence of volumes supply and demand of goods on the market from their prices . Other things being equal, than the price of product lower, the greater the effective demand for it (willingness to buy) and the less supply (willingness to sell). Usually the price is set at equilibrium point between supply and demand. The law was finally formulated in 1890 by Alfred Marshall. Demand – the relationship between all possible prices for a product and the quantity of the product that buyers are willing to buy at these prices.Demand reflects, on the one hand, the buyer’s need for certain goods or services , the desire to purchase these goods or services in a certain quantity and, on the other hand, the ability to pay for the purchase at price , which is within the “available” range.Along with these generalized definitions, demand is characterized by a number of properties and quantitative parameters, of which we should first of all highlightvolume or size demand. From a quantitative perspective, the demand for product , understood as the volume of demand, means the quantity of a given product that buyers (consumers) are willing, ready and have the financial ability to purchase over a certain period at certain prices.Quantity of demand - the quantity of goods or services of a certain type and quality that a buyer wants to buy at a given price over a certain period of time. The amount of demand depends on the income of buyers, prices for goods and services, prices for substitute goods and complementary goods, buyer expectations, their tastes and preferences.Law of Demand - the quantity (volume) of demand decreases as the price of the product increases. Mathematically this means that there is an inverse relationship between the quantity demanded and the price (however, not necessarily in the form hyperboles) . That is, an increase in price causes a decrease in the quantity demanded, while a decrease in price causes an increase in the quantity demanded.The nature of the law of demand is not complicated. If the buyer has a certain amount money to purchase a given product, he will be able to buy less of the product the higher the price and vice versa. Of course, the real picture is much more complicated, since buyer can attract additional funds, buy another product instead of this one - substitute product.

Non-price factors affecting demand:

• Income level in society;
• Market size;
• Fashion, seasonality;
• Availability of substitute goods (substitutes);
• Inflation expectations.

Demand Schedule (Demand Curve)- the relationship between the market price of a product and the monetary expression of demand for it. The demand curve shows the probable quantity of a good that can be sold in a certain time and at a certain price. The more elastic the demand, the higher the price can be set for the product. Elasticity of demand is the market’s reaction to the lack of a product, the possibility of replacing it, the price of competitors, lower prices, the reluctance of buyers to change their consumer habits and look for cheaper goods, improving the quality of goods, the natural increase in inflation and other factors.

4) Offer(in economics) - a concept reflecting the behavior of a commodity producer in the market, his readiness produce (offer) any quantity of goods over a certain period of time under certain conditions.

Quantitatively measured, expressed by size, volume of supply. The supply quantity characterizes the quantity of goods and services that the producer is willing and able to sell at a given price in a certain period of time. Supply volume(volume of output) - the quantity of goods that a commodity producer (firm) is ready to offer at a certain price for a certain period of time, all other things being equal. Supply quantity- the quantity of a product that is available for sale at a certain price. As a rule, there is a direct relationship between the price level and the quantity of goods. Increasing prices leads to additional profits, allowing the manufacturer to expand production and attracts new producers to the market. Law of supply- with other factors remaining constant, the value (volume) of supply increases as the price of the product increases. An increase in the supply of a product with an increase in its price is generally due to the fact that, with constant costs per unit of product, as the price increases, profit increases and it becomes profitable for the manufacturer (seller) to sell more goods. The real picture on the market is more complex than this simple diagram, but the trend expressed in it does take place.

Factors influencing supply:

1. Availability of substitute goods.

2. Availability of complementary (complementary) goods.

3. Level of technology.

4. Volume and availability of resources.

5. Taxes and subsidies.

6. Natural conditions

7. Expectations (inflationary, socio-political)

8. Market size

5) Supply schedule (supply curve) shows the relationship between market prices and the quantity of goods that producers are willing to offer.

The main factor influencing the movement of the supply curve is production costs. As you know, goods are manufactured by companies for profit. For example, farms grow wheat. They grow more wheat, because at the moment wheat is more profitable to sell than other crops. And vice versa. The main factor influencing the movement of the supply curve is technological progress. New seed, a more efficient tractor, a better computer program for crop rotation - all this allows the farmer to reduce production costs and change the supply of his product. Production costs are a key element of the long-term effect on the supply curve.

6) Economic equilibriumis the point at which the quantity demanded and the quantity supplied are equal. In economics, economic equilibriumcharacterizes a state in which economic forces are balanced and, in the absence of external influences, the (balanced) values ​​of economic variables will not change.

Market equilibrium- a market situation when the demand for a product is equal to its supply; the volume of the product and its price are called equilibrium or market clearing price. This price tends to remain unchanged in the absence of changes in supply and demand.

Market equilibrium is characterized by equilibrium price and equilibrium volume.

Equilibrium price(English) equilibrium price) is the price at which the volume of demand in the market is equal to the volume of supply. On a supply and demand graph, it is determined at the point of intersection of the demand curve and the supply curve.

Equilibrium volume(English) equilibrium quantity) - the volume of demand and supply of goods at the equilibrium price.

7) Homework

3) If the real price is higher than the equilibrium price, there is an excess supply . Due to the fact that the price is higher than the equilibrium price, there is an increase in output, but consumers’ desire and ability to buy the product decreases. Therefore there arisesexcess supply of a given product, which forces the company to reduce prices.

6) If the real price is below the equilibrium price, there is a shortage - the quantity demanded is greater than the quantity supplied. At a reduced price, sellers will offer fewer goods, but the number of buyers will increase due tocompetition that has arisen between buyers, prices will rise.

4) This section reflects the loss of the seller, that is, they will sell the product at a price below the equilibrium price and this will be their loss.

The demand price for a product (P D) is determined by the marginal utility of each unit of the product, and the market price of a product is determined by the interaction of demand (D) and supply (S). As a result of this interaction, the product is sold at the market price (P e) (Fig. 6.2). Therefore, the consumer wins by buying the product cheaper than he could pay for it. This gain is equal to the area of ​​the shaded triangle P D EP e (Fig. 6.2).
Knowing marginal costs (MC) allows you to determine manufacturer's gain. The fact is that the minimum price at which a firm can sell a unit of output without loss should not be lower than marginal cost (MC) (the increase in costs associated with the production of each subsequent unit of output) (Fig. 6.2). Any excess of the market price of a unit of production over its MS will mean an increase in the firm's profit. Thus, manufacturer's gain – this is the amount of excess of the selling price (market price) over the marginal costs of production. The firm receives such a surplus from each unit of goods sold at a market price (P e) that exceeds the marginal cost (MC) of producing that unit. Thus, by selling the volume of goods (Q e) (at different MS for each unit of production from 0 to Q E) at P E, the company will receive a gain equal to the shaded area P e EP S.
10)Change in Quantity Supply and Supply

1. A change in the quantity of supply is observed when the price of the product in question and other constant factors of market conditions change and implies movement along the supply curve (arrow No. 1)
2. A change in supply, on the contrary, means a change in the entire function of supply due to a change in any non-price factors with a constant price for the analyzed product (arrow No. 2)

Q - number of products that the manufacturer is ready to offer
S - sentence

• changes in production costs as a result of technical innovations, changes in sources of resources, changes related to tax policy, as well as characteristics that affect the formation of the cost of production factors.
• Entry of new companies into the market.
• Changes in prices for other goods leading to a firm leaving the industry.
• Natural disasters
• Political actions and wars
• Forward economic expectations

• Firms engaged in the industry, when prices increase, use reserve or quickly commissioned new capacities, which automatically leads to an increase in supply.
• In the event of a prolonged increase in prices, other producers will flock to this industry, which will further increase production and, as a fact, an increase in supply is possible.

Technological progress has a huge impact on the supply curve. It allows you to reduce production costs and vary the number of goods on the market. The analysis of the supply schedule is largely determined by the production technology used by the manufacturer, the availability and accessibility of raw materials used in the manufacture of the product. If the mobility of production and the resources used in it are high, then the supply curve will have a flatter shape, i.e. flattened down.

When analyzing market conditions, it is necessary to make a clear distinction between demand and quantity demanded, as well as between changes in quantity demanded and changes in the demand for a given product.

Change in quantity demanded observed when the price of the product in question changes and all other parameters (tastes, income, prices for other goods) remain unchanged. On the graph, such a change is reflected by movement along the demand curve from point (arrow No. 1). Change in demand occurs when market prices for the product in question remain unchanged, i.e. under the influence of any non-price factors, and is reflected on the graph by a shift in the demand curve to the right or left (arrow No. 2).

Factors that influence demand at constant prices for the product in question are called non-price determinants of demand. Among the most significant non-price determinants, economists identify:

For the overwhelming group of normal quality goods, an increase in income causes an increase in demand at the same prices and a corresponding shift of the demand curve to the right.

However, for relatively inferior goods of comparatively lower quality, an increase in income induces the consumer to replace the relatively inferior good with a better one and thereby reduces demand. As a result, the demand curve shifts to the left.

All other things being equal, the greater the number of potential buyers, the higher the market demand for the product.

This factor is non-price, because assumes the price of the product in question remains unchanged. The price of any other product other than the one we are analyzing acts as a non-price or exogenous factor.

12) A table that reflects how changes in supply and demand are reflected in the equilibrium price and equilibrium quantity.