Non-price factors also influence demand formation. These factors include:

• changes in buyers' incomes. Income growth leads to an increase in purchasing power and an increase in demand for normal goods; to reduce demand for inferior goods and services (margarine, potatoes, shoe repair, etc.);

change in the total number of buyers and their structure. The growth of the urban population, for example, increases the demand for housing; with an increase in the birth rate, the demand for children's goods and educational services increases;

• changes in the price of other goods that replace or complement each other. Interchangeable goods (substitutes) are goods that can satisfy the buyer's needs by replacing one good with another (coffee-tea, butter-margarine, roses-carnations, etc.). If goods are substitutes, then there is a direct relationship between the price of one and the demand for the other. With a wide range of substitutes, demand easily switches from the more expensive product to its close analogue, increasing the demand for it. For example, rising prices for air travel increases demand for rail and road transport services.

Complementary goods (complementary goods) are goods that satisfy the buyer’s needs in combination with each other (camera and film, car and gasoline, skis and bindings). A decrease in the price of one of the complementary goods leads to an increase in the quantity of demand for it and the demand for the product that complements it. Thus, a decrease in prices for computers leads to an increase in demand for printers, modems, scanners;

• customer tastes and preferences are the most difficult factor to take into account and predict. The demand for jeans and sheepskin coats, for plastic or wooden windows, for European-quality renovation paraphernalia is very flexible and little predictable (for example, advertising campaigns play a big role here);

changing expectations. If consumers expect that the relative price of a good will increase (with a predicted increase, for example, in taxes), then they will try to buy the good before the expected change. Hence - market fluctuations in demand. Thus, expectations of an increase in customs duties on granulated sugar have more than once led to a sharp increase in demand for it.
The possible changes in demand that we have considered under the influence of various factors lead to the formation of new demand for this type of product, which in the graph (Fig. 3.2) will be reflected in a shift of the demand curve to the right (if it increases) or to the left (if it decreases). An increase (decrease) in demand means that at each existing price, buyers are willing to buy more (less) quantities of goods or services.

Rice. 3.2. Formation of new demand under the influence of non-price factors Moving the demand curve from position D to /), indicates an increase in demand for a product ((?! gt; Q) under the influence of one or a number of price factors, and moving to position /)2 indicates a decrease in demand (Q2 lt; Q).
In the new position (D, or D2), the demand curve, as before, expresses the dependence of two variables: price and quantity demanded; but this is a new addiction.
Law of supply
The second group of economic agents directly involved in the formation of the market price for a product are producers-sellers. They are the ones who offer their goods for sale, participating in the formation of the price of the goods on the supply side.

Supply (English supply - S) is the mass of goods and services on the market that producers are willing to sell to buyers at various price levels in a certain place and at a certain time. In an effort to obtain the maximum possible profit, the seller will expand sales volumes when the price rises and reduce them when it falls, i.e. The dependence of supply volume on price is direct. This is the essence of the law of supply.
This law is clearly demonstrated by the “price - supply” model (Fig. 3.3).

Rice. 3.3. Supply curve:
1\, Р„ 1\ - supply prices, Qv Q„ Q3 - supply quantities
Movement along the supply curve shows a change in the volume of goods offered to the market depending on the supply price, the minimum price at which sellers agree to sell their goods on the market. The lower the supply yen, the fewer sellers are willing to offer the product to the market.
The obstacle is production costs. A commodity producer will not sell goods at a yen that does not cover the costs of its production. Conversely, the higher the yen, the greater the incentive for both the expansion of existing firms in the industry and (with a steady increase in the yen) also for the involvement of new firms in this industry.
To the tabular and graphical expression of the law of supply, an analytical one is added, which makes it possible to show the linear function of the supply in the form of an equation: Os = a + bP (a is the point of intersection with the X axis, b is the slope to the Y axis).
A change in any non-price factor in supply formation leads to a shift in the supply curve. In this situation, existing supply prices will correspond to new supply volumes.
Influence of non-price factors
Non-denomination factors that shape supply include all factors that influence the situation in the production of a given product and affect the cost of production:

• technology used in production;
• prices for used resources;
• taxes and subsidies;
• number of sellers;
• the time interval required to increase production.

An increase in the cost of producing a good leads to an increase in the supply price for each volume of production and a shift of the supply curve upward to the left. Reducing costs will cause prices to move in the opposite direction and shift the supply curve downward to the right.

Rice. 3.4. Changes in supply under the influence of non-price factors of supply Increase in supply (S -gt; S2): at each of the existing prices, the volume of supply increases (Q lt; Q2). Decrease in supply (S-gt; .5,): at each of the existing prices, the quantity supplied decreases (Q gt; Qp.

Partial market equilibrium
Supply and demand curves show the prices buyers and sellers set based on their preferences and income (buyers) or costs (sellers). However, goods and services are sold not at demand prices or supply prices, but at market prices.
The founder of the neoclassical direction in economic theory, A. Marshall, analyzed the formation of market prices as a result of the interaction of supply and demand.
The model illustrating the formation of yen in the market is called the model of partial market equilibrium (equilibrium in the market for one product). It is constructed by combining the market demand and supply curves on one graph (Fig. 3.5).
Figure 3.5 illustrates the diverse plans of sellers and buyers and their multiple discrepancies in both prices and volumes of purchases and sales. When meeting on the market, not all participants are able to fulfill their plans. However, there is a group of buyers and sellers that have coinciding interests, which is illustrated in the graph by the point of intersection of the demand curves and

Rice. 3.5. Model of partial market equilibrium Demand curve D shows that with a change in price, buyers' plans for the expected volume of purchases change. The supply curve S shows the change in the intentions of sellers in terms of production volumes with a change in price.
offers. The situation when the market is at point E - the equilibrium point, which corresponds to the equilibrium price РЁ and the equilibrium sales volume (Qt), is called a balanced market situation. In this provision, neither sellers nor buyers have any desire to violate it.
Unbalanced market
If buyers or sellers are guided in the market by the yen Pv which is below the equilibrium РЁ (Fig. 3.6), then a situation of excess demand or shortage arises in the market (02 gt; O".
A shortage in market conditions will be indicated by a decrease in inventories; in their absence, the appearance of queues, coupons, etc. Sellers, trying to replenish stocks, will increase production while simultaneously raising prices. Raising prices will force some buyers to abandon planned purchases.
Thus, due to market imbalance, we will observe an upward movement along both the supply curve and the demand curve until the equilibrium situation is restored. This movement can be extremely uneven, and it is quite possible that a new equilibrium situation will arise with parameters of demand, supply and price different from the original ones.
The second possible situation of discrepancy between the plans of sellers and buyers is the expectation of a price above the equilibrium (P2). In this case, the supply of goods exceeds demand (04 gt; 0)), a situation of surplus goods on the market arises.
R

Rice. 3.6. Consequences of market disruption

What is the model of behavior of sellers and buyers in this case? An increase in inventory above the planned level will lead to a gradual reduction in the volume of production of this product and a decrease in prices for it (sales are possible), which will cause an increase in demand. A movement down the supply and demand curves of both groups of market participants will lead to the restoration of the equilibrium price.
In the figure, finding the equilibrium point is quite simple. In practice, such equality of prices and quantities is not sustainable. In real life, finding a balance point is comparable to shooting at a moving target. The market finds itself in a state of equilibrium, but the situation changes so quickly that it leaves it, starting to search for new coordinates of the magic point, etc.
The situations considered demonstrate a model of static market equilibrium. However, the market is a living organism where constant changes in supply and demand occur (on the graph the curves shift to the right or left), which entails a shift in the equilibrium point. The way and speed at which the market reaches a dynamic equilibrium will depend on the ratio of the initial and new equilibrium prices, as well as on the time periods considered.
Possible combinations of changes in price and sales volumes are presented in table. 3.2.
Table3.2. The impact of changes in supply and demand on the equilibrium price and equilibrium sales volume

Changes in supply and demand	Dynamite equilibrium price (P)	Dynamics of equilibrium sales volume (Q)
Demand grows, supply remains unchanged	Growing	Growing
Demand falls, supply remains unchanged	Falls	Falls
Supply increases, demand remains unchanged	Falls	Growing
Supply falls, demand remains unchanged	Growing	Falls
Demand grows and supply falls	Growing
Demand is growing and supply is growing	Nothing definite can be said	Growing
Demand falls and supply increases	Falls	Nothing definite can be said
Demand falls and supply falls	Nothing definite can be said	Falls

Surplus consumer.™ and producer
The equilibrium price PE brings a certain gain to buyers who are willing to buy goods at higher prices. Consumer gain (surplus) is the difference between the individual demand price (the maximum price that the buyer is willing to offer) and the market price when purchasing a given unit of goods. Purchasing at the price РЁ gives buyers a gain, which is shown in Fig. 3.7 is shown by the figure ReBE.
There is also a group of sellers who have the opportunity to sell their goods at prices below the equilibrium. The producer's gain (surplus) is the difference between the supply price (the minimum price at which the producer is willing to sell his products) and the market price. Selling at yen PE gives them a gain corresponding to the figure PIAE in Fig. 3.7.

Rice. 3.7. Benefits for consumers and producers
State and prices
Government intervention in the pricing process is necessary due to the presence of “market failures” (monopoly high prices for basic necessities, production of cheap but environmentally harmful products) and the needs of macroeconomic regulation (maintaining the competitiveness of national industry).
Almost all countries use both direct (for example, fixed, hard yen) and indirect (taxes and subsidies)

days) methods of government intervention in pricing. Fixed, artificially low prices (“ceiling” prices) are resorted to in order to curb inflation and support low-paid segments of the population, which, however, inevitably leads to the formation of a deficit and structural inconsistency. Fixing prices at an artificially high level ("floor" prices), used by the state to support one or another sector of the economy (most often agriculture), often leads to overstocking.

Introduction

Goals of work

• Introduction to the application of the economic model “Demand. Demand factors."
• Study of changes in demand from changes in influencing factors.
• Experimental determination of the dependence of the magnitude of changes in demand on the magnitude of changes in influencing factors.

Work plan

Brief theory

DEMAND– the purchasing power of buyers for a given product at a given price. Demand is characterized the amount of demand – the quantity of goods that buyers are willing to purchase at a given price. The word “ready” means that they have the desire (need) and opportunity (availability of the necessary funds) to purchase goods in a given quantity. It should be noted that demand is a potential solvent need. Its value indicates that buyers are ready to purchase such a quantity of goods. But this does not mean that transactions in such volumes will actually take place - this depends on a number of economic factors. For example, manufacturers may not be able to produce such quantities of goods. Can be viewed as individual demand (demand of a specific buyer), and total value demand (demand of all buyers present on the market). In economics, we study mainly the general amount of demand, since individual demand highly depends on the personal preferences of the buyer and, as a rule, does not reflect the real picture that has developed in the market. Thus, a specific buyer may not have a need for any product at all (for example, a bicycle), nevertheless, there is a demand for this product in the market as a whole. As a rule, the demand for a product is subject to law of demand .
LAW OF DEMAND - a law according to which, when the price of a product increases, the demand for this product decreases, other things remaining constant factors . The law of demand may have some exceptions. For example, for some prestigious goods, a small increase in price can sometimes lead to an increase in demand, since a higher price compared to analogues creates the illusion in the buyer that this product is of higher quality or fashionable. The law of demand has a graphical representation generally accepted in economics in the form demand graph .
DEMAND SCHEDULE – a graph showing the dependence of the quantity demanded on the price. Each price value corresponds to its own demand quantity. This dependence can be expressed graphically in the form demand curve (demand line) on the demand graph. Please note that although the values ​​of the independent variable are usually plotted along the abscissa axis, on the demand graph, on the contrary, it is customary to plot the price (P) along the abscissa axis, and quantity (Q) along the ordinate axis.
DEMAND CURVE - a continuous line on the demand graph, in which each price value corresponds to a certain quantity demanded. The demand line on the chart may look different depending on the product. It is usually depicted as a curve, resembling a hyperbola. The demand curve is usually depicted only in its central part, without extending the line to areas of too low or too high prices for a product, since such situations are, as a rule, speculative and the study of demand in them is in the nature of assumptions. The demand curve can change its shape, shifting to the right or left, under the influence of non-price demand factors .
DEMAND FACTORS (determinants of demand) – factors influencing the amount of demand. The main determinant is the price of the product, which affects demand in accordance with law of demand . In addition, there are a number of other factors that are commonly called non-price demand factors .
NON-PRICE DEMAND FACTORS (non-price determinants of demand) - factors that influence the amount of demand and are not related to the price of the product. When non-price factors change, the quantity of demand changes at given price values; thus changing the demand curve. In this case we usually talk about shift in demand curve . When demand increases, the curve shifts to the right; when demand decreases, it shifts to the left.
Non-price factors include:

• Consumer income . As consumer income increases, demand usually increases. However, it should be taken into account that the structure of consumption changes, and therefore some goods do not obey the general pattern. Thus, the demand for the cheapest, low-quality goods (for example, second-hand clothes, shoes made of cheap leatherette, low-quality food products), on the contrary, decreases, since people who were forced to buy these goods are now able to purchase higher quality products . Goods for which demand increases with increasing monetary income are called normal goods, or goods of the highest category. Goods for which demand changes in the opposite direction are called inferior goods. This model considers a product from the category of normal goods.
• Tastes, fashion . Changes in consumer tastes under the influence of fashion, advertising, and other factors cause a corresponding change in demand for goods. When consumer preferences increase, the demand for a product increases; when it decreases, it decreases. This factor has the greatest impact on fashionable goods (clothing, shoes), and the least on durable goods.
• Number of consumers . An increase in the number of buyers in the market causes an increase in demand, a decrease in the number of buyers leads to a decrease in demand. The number of consumers may change due to various factors, for example, changes in population due to natural increase or migration. In international trade, the number of consumers increases when goods are promoted to the markets of other countries; on the contrary, the reduction of export and import quotas and the introduction of an economic embargo reduces the number of consumers of goods on the world market. Although the number of buyers has a significant effect on demand, this is true only for goods that are equally in demand everywhere. For example, the entry of domestic cars into the US market, although it will significantly increase the number of potential buyers, will not lead to a significant increase in demand, since these cars will not seem of sufficient quality to American buyers. The same situation arises with any goods that are in demand only within the framework of one of the cultures - national clothing, national cuisine products - or goods specific for use in a certain area (desert, taiga, coastal areas).
• Substitute prices . Almost every product on the market has substitute products that perform the same or nearly the same functions. An example could be televisions from different manufacturers, different brands of cars. Substitute goods divide the market for a given type of product among themselves. In the event that the price of one of the interchangeable goods increases, some of its buyers, for reasons of economy, will switch to another, cheaper product; if the price decreases, then this, on the contrary, will attract buyers from among those using substitute goods. Thus, an increase in the price of substitute goods causes an increase in the demand for the product being replaced, while a decrease in the price of substitutes leads to a decrease in the demand for this product. This factor is most important for those products that are most similar to their substitutes, for example, mineral water. If the product has some unique properties for which it is difficult to find a full-fledged substitute, the importance of this factor decreases.

Other non-price demand factors include:

• Consumer Expectations . Demand may vary depending on consumer expectations about future commodity prices, product availability, and future income. Thus, in extreme economic situations, the demand for essential goods (salt, matches, soap) increases significantly, since buyers are afraid of their disappearance from the shelves. The same thing happens when expecting an increase in prices for certain goods. On the contrary, in anticipation of lower prices (for example, for new crop vegetables), demand decreases. However, consumer expectations are difficult to take into account, and therefore this factor is not used in the model.
• Prices of complementary goods . Some products have complementary products. For example, for cameras this will be film or memory cards. Prices for complementary goods affect demand in the opposite way. So, if prices for memory cards increase significantly, then the demand for digital cameras will decrease, and vice versa. Not all products have complementary products, so this factor is not used in the model.

Note that the level of influence of various non-price factors on demand depends greatly on the type of product.

Getting to know the model

1.	By moving a large point along the surface of the curve with the mouse, see how the quantity demanded Q changes depending on the change in price P. You can see the numerical values ​​of P and Q in the panel in the upper right corner of the model.
2.	Perform the same actions using the counter buttons located near the P field on the top right panel. Use these buttons when you need to set the exact P value. You can also enter a value directly into the P field. Try this: enter 6 in the P field and press Enter.
3.	In the middle of the right side of the model there is a scale of demand factors, consisting of four vertical bars with pointers. Hover your mouse over each of the lines one by one, and read the names of factors A, B, C, D in the tooltip. Try changing the value of the demand factors by moving the pointers up and down. Please note that this then changes the position of the demand curve and the percentage value of the corresponding factor, which you can see in the boxes in the upper right panel. You can also change factor values ​​using the counters in the top right panel. Try this.
4.	Click the button Fix the curve. Then change the value of one or more factors. Now there are two curves on the graph - the more transparent one is the curve at the moment of its fixation, and the green one is the changed curve. This way you can track in which direction and how much the curve shifts when certain factors change.
5.	Click the Burn button. The main values ​​characterizing the diagram are recorded in the table located at the bottom of the model.
6.	Click the Reset button. It resets all results and returns the model to its original state.

Methodology and procedure for performing laboratory work

1.	Experimentally find the answer to the question: “What is the nature of the dependence of demand on non-price factors?” To do this, follow these steps: Click the Reset button. Fix the curve. Alternately changing each of the factors in the direction of decrease and increase, determine the nature of the dependence of demand on this factor by filling out the following table: Factor name As the value of a factor decreases, the demand curve shifts (to the right or to the left) How does this factor affect demand (direct or inverse) Consumer income Tastes, fashion Number of consumers Prices for substitute goods Table 1.
2.	Experimentally find the answer to the question: “What is the magnitude of the dependence of demand on non-price factors?” To do this, follow these steps: Click the Reset button again. Record the result with the Write button. We will call this first measurement the control one. Alternately change the values ​​of each factor up to 30%, while the values ​​of the remaining factors should remain at 0%. In each case, leave the price at 5 thousand rubles. Record your results. Fill out table No. 2. Fill in the “Q value” column based on the measurement results. Calculate the values ​​for the column “Coefficient of change Q when the factor changes from 0% to 30%” using the formula: where Q n is the value of the demand quantity Q after changing the percentage value of the studied factor n; Q 0 – Q value during control measurement. Present the result in the table as a coefficient with an accuracy of 3 decimal places. Significance of factors Q value Consumer income Tastes, fashion Number of consumers Prices for substitute goods Control measurement 0 % 0 % 0 % 0 % - Factor under study Consumer income 30 % 0 % 0 % 0 % Tastes, fashion 0 % 30 % 0 % 0 % Number of consumers 0 % 0 % 30 % 0 % Prices for substitute goods 0 % 0 % 0 % 30 % Table 2. Repeat the same measurements, changing the value of the factors from 0% to –20%, and fill out table No. 3. Significance of factors Q value Consumer income Tastes, fashion Number of consumers Prices for substitute goods Control measurement 0 % 0 % 0 % 0 % - Factor under study Consumer income –20 % 0 % 0 % 0 % Tastes, fashion 0 % –20 % 0 % 0 % Number of consumers 0 % 0 % –20 % 0 % Prices for substitute goods 0 % 0 % 0 % –20 % (measurements for P = 5 thousand rubles) Table 3. Repeat both pairs of measurements for a P value of 8 thousand rubles. Fill out tables Nos. 4 and 5. Significance of factors Q value Coefficient of change Q when the factor under study changes from 0% to 30% Consumer income Tastes, fashion Number of consumers Prices for substitute goods Control measurement 0 % 0 % 0 % 0 % - Factor under study Consumer income 30 % 0 % 0 % 0 % Tastes, fashion 0 % 30 % 0 % 0 % Number of consumers 0 % 0 % 30 % 0 % Prices for substitute goods 0 % 0 % 0 % 30 % Table 4. Significance of factors Q value Coefficient of change Q when the factor under study changes from 0% to –20% Consumer income Tastes, fashion Number of consumers Prices for substitute goods Control measurement 0 % 0 % 0 % 0 % - Factor under study Consumer income –20 % 0 % 0 % 0 % Tastes, fashion 0 % –20 % 0 % 0 % Number of consumers 0 % 0 % –20 % 0 % Prices for substitute goods 0 % 0 % 0 % –20 % (measurements for P = 8 thousand rubles) Table 5. Based on the data in tables Nos. 3–5, fill out summary table No. 6, calculating the required average values. Factors Average coefficient of change Q when demand factors change When the factor value increases from 0% to 30% When the factor value decreases from 0% to -20% Consumer income Tastes, fashion Number of consumers Prices for substitute goods Table 6. Which factor influences demand the most? Which one has less influence than others? Think about what product might have such a gradation of influencing factors. Try to find the answer to this question and write it down.
3.	Experimentally find the answer to the question: “Is the dependence of demand on income proportional?” When income increases, for example, by 20%, consumers can buy exactly 20% more goods. Does this mean demand will increase by 20%? In this task we will only change the values ​​of the “Consumer Income” factor. Having brought all factors to a value of 0%, set the price of the product to 3. Increase the value of the factor “Consumer Income” to 20%. Fix the amount of demand. Reduce the value of the Consumer Income factor to -20%. Fix the quantity demanded again. Calculate how the increase in demand relates to the change in consumer income using the formula: where Q n is the value of the demand quantity Q after changing the percentage value of the studied factor n; Q 0 – the value of Q at zero values ​​of all factors, ΔA – the value of the factor “Consumer Income” (as a percentage of the initial value). Fill in the first column of Table 7. Repeat the same measurements for prices equal to 5 and 8. Fill in the remaining columns of table 7. Table 7.

Have you discovered a doubling of demand in at least one case? If not, try to explain why. Write down the answers you receive.

Conclusions from the work

Draw conclusions on the work done (based on the analysis; conclusions must correspond to the stated purpose of the work).

Questions for self-control

1.	Define demand. What do the words “solvent need” mean?
2.	What is individual demand and total quantity demanded? Which of these types of demand is studied by economics?
3.	Formulate the law of demand.
4.	Does the law of demand apply in all cases?
5.	What non-price factors of demand do you know?
6.	What is the nature of the relationship (direct, inverse) between non-price factors and demand for a product?
7.	For what types of goods will an increase in consumer income not lead to an increase in demand?
8.	What is a substitute product?
9.	In what cases does the price of substitute goods affect demand the least?
10.	What are complementary products? Give examples of such products.
11.	For which products will an increase in the number of buyers not lead to a significant increase in demand for the product?
12.	Does demand change proportionally to changes in consumer income? Why?

Demand is a request from a potential or actual buyer, consumer, to purchase any product using the funds available to him intended for this purchase.

Demand, on the one hand, reflects the consumer’s need for certain goods or services, the desire to buy these goods in a certain quantity and, on the other hand, the ability to pay for this purchase at a price that is within the “affordable” range.

Along with such very general definitions, demand is characterized by a number of quantitatively expressed properties, of which, first of all, the volume of demand, as well as its magnitude, should be highlighted.

From the point of view of quantitative measurement, the demand for a product should be understood as the volume of demand, which essentially means the quantity of a given product that consumers are willing and ready to purchase (having the financial ability to do so) for a certain period and at a certain price.

The quantity of demand is a certain amount of goods (goods and/or services) of a certain type, as well as quality, that the buyer wants to buy over a certain period of time at a certain price. The amount of demand is determined by the total income of buyers, the level of prices for goods and services (prices for substitute goods, as well as complementary goods), consumer expectations, tastes and preferences.

Speaking about the non-price characteristics of a product, in addition to price and quantity of demand, there are also a number of other factors.

These primarily include:

• - consumer tastes;
• - fashion;
• - purchasing power (amount of income);
• - the value of prices for other goods, as well as the possibility of replacing one product with another.

The law of demand is that the level of demand is inversely proportional to the price of a product. This means, in mathematical terms, that there is an inverse relationship between the quantity demanded and the price. In other words, an increase in price results in a decrease in the quantity demanded, and vice versa, a decrease in price causes an increase in demand.

The nature of the law of demand is not that complicated. For example, if a buyer has a certain amount of money to purchase a product, then, whatever one may say, he will buy less of the product the higher the price, and vice versa.

Of course, the real picture looks much more complicated in reality, since the buyer is able to attract additional amounts of funds by buying another product instead of the one planned for purchase - a substitute product (for example, instead of increasingly expensive coffee - tea or vice versa).

Non-price factors that influence demand to some extent:

• · Income level of the population;
• · Market volume;
• · Seasonality of goods and fashion;
• · Availability of substitute goods;
• · Inflation expectations.

Elasticity of demand is an indicator characterizing fluctuations in aggregate demand that are caused by changes in prices for certain goods. Demand should be considered elastic if it has formed under the condition that the change in the percentage expression of its volume is higher than the price reduction (also in %).

If the indicators of a decrease in prices, as well as an increase in demand, which are expressed as a percentage, are equal to each other, that is, in other words, the increase in the volume of demand only compensates for the decrease in the price level, then we can say that the elasticity of demand is equal to one.

There is another case - when the degree of price reduction is higher than the demand for goods. In this case, demand is inelastic.

Thus, the elasticity of demand is an indicator of the degree of sensitivity (or reaction) of buyers to changes in the price of a good.

Elasticity of demand is also caused not only by an increase or decrease in the price of a product, but also by a change in the income of the population.

Thus, it is customary to distinguish between the elasticity of demand by price and also by income.

The reaction of buyers to a change in the price of a product can be both strong and weak, as well as neutral.

Each of the above consumer groups generates corresponding demand, which can be elastic, inelastic, or single. There are also options when demand is completely elastic or completely inelastic.

The elasticity of demand can be quantitatively measured by the elasticity coefficient, thanks to the following formula:

where: KO - demand elasticity coefficient; Q -- change in the number of sales (in%); P --price change (in %).

As a rule, different goods have different price elasticities. For example, bread and salt can be called typical examples of inelastic demand. In general, an increase or decrease in prices for them does not have a significant impact on the volume of their consumption by the population.

Knowledge about the meaning and mechanisms of the degree of elasticity of demand for a product is of great practical importance. So, for example, sellers of goods with high elasticity of demand will easily be able to reduce prices in pursuit of the goal of a sharp increase in sales volume, or to obtain greater profits than if, for example, they set the price higher.

For goods characterized by low elasticity of demand, this pricing practice can no longer be called acceptable, since in the event of a price reduction, sales volume will change little, without compensating for lost profits.

If there are a large number of sellers, the demand for any product will be elastic, since any, even a slight increase in the price of one of the competitors will encourage buyers to go to other sellers who offer the same product, but only a little cheaper.

Aggregate demand is the total effective demand for all goods and services produced in an economy.

In order to characterize aggregate demand, one should have an idea of ​​exactly what price and non-price factors of influence take place.

Price factors determine the very trajectory of the aggregate demand curve. In other words, factors of this type express the dependence of the price level on the volume of real production.

There are three main factors that have a certain impact in this context:

• · interest rate effect;
• · effect of real cash balances;
• · effect of import purchases.

The interest rate effect illustrates the dependence of the price level and interest rate on the demand of the population for consumer goods, and of enterprises for investment goods. When the price level rises, the interest rate on loans also rises.

When the interest rate increases, buyers, as well as firms, will not be interested in loans at too high interest rates, and this, accordingly, will entail a decrease in consumer and investment demand.

The real cash balance effect illustrates the preservation of the value of cash holdings when an economy experiences high inflation. If over a certain period of time there is a depreciation of the monetary unit (that is, when, in simple terms, a ruble, dollar, euro can buy fewer goods today than yesterday), then the value of financial assets, which is expressed in certain goods, also decreases. Therefore, the higher the average rate (inflation), the less quantity of goods or services consumers will be able to buy with the funds they have set aside for purchases. That is, the volume of aggregate demand will decrease.

The effect of import purchases is the impact of inflation, which has a “local” significance, on consumer choice between domestic goods that have risen in price, or imported goods that have changed in price. In such a situation, the consumer will discard the false sense of patriotism and give preference to imported goods. Thus, the volume of aggregate demand for domestic goods will decrease.

The three listed effects explain the change in real output, which underlies the decrease or increase in aggregate demand, depending on changes in the price level.

The effect of the three above factors is considered provided that all other parameters remain unchanged. In real life, these parameters change and therefore belong to non-price factors.

The impact of non-price factors, therefore, if depicted graphically, shifts the aggregate demand curve to the right (increasing) or to the left (decreasing).

According to the structure of aggregate demand, one should also highlight non-price factors that affect changes in consumer and investment spending, in the export-import ratio, as well as changes in government procurement.

The state's tax policy is that if taxes on the income of households and enterprises increase, then the aggregate demand curve will shift downward, that is, to position AD>2. If taxes are reduced, this will result in an increase in personal income, and consumers will have the opportunity to purchase more various goods, and firms will be able to purchase more investment goods. Thus, aggregate demand will increase, and the AD curve will shift upward (AD>1).

Expectations of consumers and producers. They occur when firms' forecasts are optimistic, and the latter resort to expanding and developing production, which helps increase household incomes. As a result, aggregate demand for consumer and investment goods increases. If the expectations of enterprises and households are pessimistic, then the reaction of aggregate demand will occur in the opposite direction and it will decrease.

Changes in government procurement are an increase in government spending. According to Keynesian theory, this will always stimulate the growth of aggregate demand, and a decrease in government orders - a decrease, on the contrary, will reduce AD.

Export-import operations. If net exports grow, it means that domestically produced goods are in demand abroad, therefore, aggregate demand increases. If imports in the economy exceed exports, this means that consumers are switching their interests to foreign goods, and the demand for domestic goods decreases, contributing to a decrease in aggregate demand.

Market mechanism- this is a mechanism for the relationship and interaction of the main elements of the market - demand, supply, price, and the main market elements.

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

Law of Demand

Demand is a solvent need for any product or service.

Quantity of demand- this is the quantity and that buyers are willing to purchase at a given time, in 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 existing market prices.

Types of demand:

• (production demand)

Factors influencing demand

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

• use of advertising
• fashion and tastes
• consumer expectations
• changes in environmental preferences
• availability of goods
• income amounts
• usefulness of a thing
• prices established for interchangeable goods
• and also depends on the size of the population.

The maximum price that buyers are willing to pay for a specific quantity of a given good or service is called at the price of demand(denote)

Distinguish exogenous and endogenous demand.

Exogenous demand - This is a demand whose changes are caused by government intervention or the introduction of any external forces.

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

The relationship between the quantity of demand and the factors that determine it is called the demand function.
In its most general form it is written as follows Where:

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

Changes occurring in the market related to the quantitative supply of goods always depend on the price set for this product. There is always a certain relationship between the market price of a product and the quantity for which there is demand. 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.

Introduction

Economics is one of the oldest sciences. She has always attracted the attention of scientists and all educated people. This is explained by the fact that the study of economics is the realization of the objective need to understand the motives, actions of people in economic activity, the laws of economic activity at all times - from Aristotle, Xenophon to the present day.

Today, the interest of educated people in economics (economic theory or political economy) not only has not dried up, but is even increasing. This is explained by the global changes that are taking place throughout the world and in Russia in particular. The prominent American scientist P. Samuelson called economics or political economy the queen of sciences. Nobel Prize winner M. Friedman wrote that economics is a fascinating science, it is amazing because its fundamental principles are very simple and can be written down on one sheet of paper, however, few understand them. The complexity of this science, which reflects the complex world of economics, is that when studied it requires, in the words of the world-famous specialist in the history of economic thought A. Heilbronner, “the endurance of a camel and the patience of a saint.”

The subject of economic theory is the study of relationships between people regarding the production, exchange, distribution and consumption of material goods and services as a result of the efficient use of scarce resources to satisfy unlimited needs.

People have both biological and socially determined needs. To satisfy these needs (for food, clothing, housing and an endless variety of other goods and services), it is necessary to use available resources: labor and entrepreneurial skills, capital, buildings and structures, natural resources. The combination of resources carried out within the framework of certain production relations is called a mode of production.

Limited resources do not allow one to have everything a person would like. Human needs exceed his capabilities, since all available resources in each country, and in the world as a whole, are limited. Therefore, universal abundance is a myth.

CHAPTER 1. The concept of supply and demand

1.1. The concept of demand. Law of Demand

Every person needs certain benefits. And if he cannot produce these goods himself or it is more profitable for him to buy them, he comes to the market to buy them. Naturally, he must have the money to buy it. This means that in the market we are no longer faced with needs as such, but with demand.

By demand, microeconomics understands the quantity of a product that buyers want and can buy on the market for this product in a given period of time under given conditions. This definition allows us to highlight the following features of demand as an object of study from the side of microeconomics.

1.Microeconomics deals with the demand for one type of product. Demand for a product can be individual or aggregate. In the first case, this is demand from individual economic entities, in the second, demand for the entire mass of a given product required by economic entities as an aggregate buyer. The latter are understood as consumers as representatives of households or firms.

2. Demand reflects not only the need for the product for the buyer, but also the latter’s ability to pay for it. Thus, demand reflects the purchasing power of the subject of demand.

3. The concept of “demand” does not yet include the fact of purchasing a product, since there can be demand for a product even in the absence of the product itself.

4. Demand is presented in a specific market: local, regional, national, international.

5. Demand has a time characteristic; it can be at the moment, day, week, month, etc. We can talk about a certain dynamics of demand for a certain product if we take it over a relatively long period.

Demand is formed under conditions determined by a complex set of various factors. We can identify a number of main factors that influence the desires of almost all buyers to purchase a certain amount of product X. These include:

1. The price of the product X itself (let’s denote it Px);

2. Prices of other goods related to product X (Pi, i=l, 2,.....n, where N is the number of goods related to product X);

3.Tastes of consumers (T);

4.Average income of consumers (Y);

5.Distribution of income between consumers (Y*);

6.Number of buyers (N);

7. Expectations of changes in product prices or consumer tastes (E).

It is impossible to study the nature of the influence of all these factors at once.
It is advisable to use a method according to which, in order to identify the nature of changes in some value of Z, depending on several unknowns (factors, in our case), it is necessary to first fix the value of all variables except one and study the relationship of Z with this unknown variable. Then consider the next unknown as a variable and identify the dependence of Z on this variable, etc. A complete search of the unknowns will reveal the nature of the change in Z under the influence of all variable factors. This method means that we examine the dependence of Z on each variable, all other things being equal. The quantity of good X that consumers are willing to buy (QD) is a function of several variables:

QD=QD (Px, Pi, T, Y, Y*, N, E)

Economists focus on studying the dependence of the quantity of goods that consumers want to purchase on the price of the goods themselves, i.e., the dependence of QD of goods X on Px, all other things being equal. Demand (D) is the entire set of values ​​QD of product X, corresponding to possible different values ​​of the price of product Px, all other things being equal.

Algebraically, the demand function is represented by the formula:

Of all the factors affecting demand, prices have the most consistent and predictable impact. A stable relationship between demand and price, in which the quantity demanded in a given period of time increases as the price decreases and vice versa, characterizes the law of demand.

Law of Demand

The property of demand is as follows: with all other parameters remaining constant, a decrease in price leads to a corresponding increase in the quantity demanded. And, on the contrary, other things being equal, an increase in price leads to a corresponding decrease in the quantity demanded. There is a negative, or inverse, relationship between price and quantity demanded. Economists call this feedback the law of demand. What is the basis of this law?

Basic observations of reality are consistent with what a downward sloping demand curve shows us. Typically, people actually buy more of a given product at a low price than at a high price. For consumers, price represents a barrier preventing them from making a purchase. The higher the barrier, the less of the product they will buy, and the lower the price barrier, the more quantity they will purchase.

1. In any given period of time, each buyer of a product receives less satisfaction, or benefit, or utility from each subsequent unit of the product. It follows that since consumption is subject to the principle of diminishing marginal utility—that is, the principle that successive units of a given product produce less and less satisfaction—consumers will buy additional units of a product only if its price falls.

2. At a slightly higher level of analysis, the law of demand can be explained by income and substitution effects. The income effect indicates that at a lower price a person can afford to buy more of a given product without denying himself the purchase of any alternative goods. In other words, a reduction in the price of a product increases the purchasing power of the consumer's monetary income, and therefore he is able to buy more of this product than before. A higher price leads to the opposite result. The substitution effect is expressed in the fact that at a lower price, a person has an incentive to purchase a cheap product instead of similar products that are now relatively more expensive. Consumers tend to replace expensive products with cheaper ones. The income and substitution effects combine to make consumers able and willing to buy more of a product at a lower price than at a high price.

The law of demand is presented tabularly and graphically, respectively, in Table 1 and Fig. 1.

Product price and quantity demanded

Table 1

The demand curve (graph) shows the quantity demanded at each price value. Note that price is the independent variable (exogenous factor) and demand is the dependent variable (endogenous factor).

1.2. The concept of a proposal. Law of supply

The supply of goods, like demand, is an integral and no less significant part of the pricing process in the market.

By supply, microeconomics understands the quantity of a product that sellers want and can sell on the market for a given product in a given period of time under given conditions. I will reveal the content of this definition.

1. The proposal concerns some kind of product, benefit, produced for sale. For example, a farmer can grow part of the potatoes for his own consumption, and part for sale. It is the second part that ensures the supply of this product.

2.The offer appears as the sum of offers from individual sellers. Although in a monopoly market it is provided by one seller.

3. Sellers mean everyone who offers goods: manufacturers, wholesalers or retailers, warehouses, stores, etc.

4. The supply of this product is ensured in a specific market: local, regional, national.

5.The supply value is determined for a certain period of time: at the moment, day, week, month, etc. Accordingly, at the moment the supply includes goods that are in stock, and for a long period, in addition, those that will be produced and offered for sale in a given period of time.

The conditions under which supply is formed are determined by the prices for a given product and the sources of supply. The price may be such that the product produced may not be offered.

The main source of supply is production. But inventory can also be considered as such. For example, a product is produced, but due to an unfavorable price, it is sent not to the market, but to a warehouse, where it lies, waiting for a favorable price to be established. If such a price is established, the goods are sent from the warehouse to the market. Since one way or another it is production that determines supply, the main factors of supply are those that determine production itself. It can be noted that sentence (S) is functionally dependent on various factors (a, b, c, etc.): S= f (A , b , V , G , d , e).

a) First of all, supply depends on the availability of resources necessary for its production. For example, the lack of natural conditions necessary for growing bananas means that the supply of this product is ensured by imports, that is, production in countries where the climate allows them to be grown.

b) Supply depends on the technology of production of this product. Production, depending on the technology, can be piece or mass, determining the corresponding offer.

c) An important factor of supply is production costs and what determines them. High costs limit supply; low costs make it possible to provide a large supply. For example, the high production costs of ocean liners lead to their individual production; the low production costs of paper clips allow them to be produced and sold in the millions.

d) The supply of a good is affected by its price. An increase in price, other conditions being constant, leads to an increase in supply; a decrease in price leads to a reduction in supply. This stable connection is characterized as the law of supply.

Law of supply

Supply is the quantity of a good or service that producers are willing to sell at a certain price during a certain period. If demand is a qualitative characteristic of consumption, then supply is a category with which one can answer the question: what determines the quantity of any product that will be produced by firms and offered for sale?

The law of supply states: supply, other things being equal, changes in direct proportion to changes in price. Considering this dependence, we will highlight the factors influencing it. The quantity of good X that producers would like to produce and sell is called quantity supplied (QSx). QSx may differ from the quantity of product X actually sold to consumers. The value of QSx also depends on the time period like QDx, so we will consider the proposal for the same constant period (year).

The quantity of good X that firms wish to produce is influenced by many factors. The main ones are: the price of the product X itself (denoted by Px); prices of resources (Pg) used in the production of X; technology level (L); goals of the company (A); reasons for taxes and subsidies (T); prices for other goods (Pi); expectations (E); number of goods producers (N).

The quantity of goods offered by firms for sale is a function of several variables: QSx=QS (Px, Pr, L, A, T, Pi, E, N).

In the case of supply of product X, we are interested in the nature of the dependence of QSx on the price of product X itself, all other things being equal.

The entire set of values ​​QSx of product X, corresponding to various possible values ​​of price Px, ceteris paribus, is called supply (S) of product X.

The law of supply is presented tabularly and graphically in Table 2 and Fig. 2.

Product price and supply quantity

table 2

Rice. 2.

1.3. Equilibrium of supply and demand

Equilibrium is a market situation when supply and demand coincide or are equivalent at a price acceptable to the consumer and producer.

Market equilibrium arises as a result of the interaction of supply and demand. To figure out how this happens, you need to combine the demand curve and the supply curve on the same graph.

The graph expresses the simultaneous behavior of supply and demand for a particular good and shows at what point the two lines intersect (i.e.). At this point equilibrium is achieved. The coordinates of point E are the equilibrium price PE and the equilibrium volume QE. Point Characterizes the equality QE = Q^ = Qc, where Qs is the volume of supply, QD is the volume of demand.

The equilibrium point shows that here supply and demand, being opposing market forces, are balanced. Equilibrium price means that as much goods are produced as buyers demand. Such equilibrium is an expression of the maximum efficiency of a market economy, because in a state of equilibrium the market is balanced. Neither the seller nor the buyer has internal incentives to violate it. On the contrary, at any price other than the equilibrium price, the market is unbalanced, and buyers and sellers strive to change the situation in the market.

Thus, the equilibrium price is the price that balances supply and demand as a result of the action of specific forces.

If the real price is greater than the equilibrium price (P), then at such a price the quantity demanded Q will be less than the quantity supplied Q2. In this case, producers will prefer to reduce the price rather than continue producing products in volumes that significantly exceed demand.

Excess supply (Q-Q2) will put downward pressure on the price.

If the real price on the market is lower than the equilibrium price (P2), then the quantity demanded on graph Q4 and the product will become scarce. Some buyers will choose to pay a higher price. As a result, excess demand will put pressure on prices.

This process will continue until it is established at the equilibrium level of PE, at which the volume of demand and supply are equal.

We owe the first formulation of general economic equilibrium to Leon Walras (1874), who, unlike Marx’s category of average price (production price), tried to abstract from the social system of production and relied on utility as the initial category. A. Marshall made an attempt to combine the theory of marginal utility with the theory of supply and demand and the theory of production costs. He took the lead in the study of the categories “demand price” and “supply price,” which is a further development of the theory of labor value.

Equilibrium is called stable if deviation from it is accompanied by a return to the original state. Otherwise, there is an unstable equilibrium.

In economic theory, there are four rules of supply and demand.

An increase in demand causes an increase in both the equilibrium price and the equilibrium quantity of the good.

A decrease in demand leads to a fall in the equilibrium price and equilibrium quantity of the good.

An increase in the supply of a good entails a decrease in the equilibrium price and an increase in the equilibrium quantity of the good.

A decrease in supply leads to an increase in the equilibrium price and a decrease in the equilibrium quantity of the good.

Using these rules, you can find the equilibrium point in the event of any changes in supply and demand.

In a competitive market for any product, the balance of supply and demand is established precisely according to this scheme. Equilibrium is the law of every competitive market. Thanks to the balance in each market, the balance of the economic system as a whole is maintained.

It is important to emphasize that the equilibrium price is set in competitive market conditions. However, it is impossible to comply with all competition conditions. The mechanism of market price equilibrium is a mechanism of approaching perfection, which is never fully achieved. And yet, in practice, according to the law of equilibrium of supply and demand, the price of any product is formed. All commodity markets are close to competitive equilibrium, unless elements of monopoly interference in the market mechanism arise that change the model of competitive equilibrium.

CHAPTER 2. Non-price factors of supply and demand

2.1. Non-price demand factors

When considering the “demand” category, we focused on the impact of changes in the price of a product on the amount of demand. It was assumed that only the price of the product changes; all other factors that may influence demand (consumer tastes, household income, prices for other goods, etc.) remain unchanged. But each of these factors affects the demand for product 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 quantity demanded changes at each given price, the entire demand curve shifts to the right or 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 curve D 0 shifts to the left, then demand will decrease. Non-price factors of demand are otherwise called non-price determinants of demand.

The following determinants have the most significant impact on buyer behavior, 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 goods consumed, customs, traditions, etc. If consumer tastes change in favor of a given product, then the demand for it will increase, and the demand curve will shift to the right.

2. Level of income of the population. An increase in consumer income leads to their demand for more
the quantity of a given good at each price, i.e. demand increases
and the demand curve shifts to the right from position D 0 to position D 1. Accordingly, the decrease in the level of income of the population
causes a decrease in demand and a shift in the demand curve to position D 2.

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

4. Consumer expectations. If buyers expect changes in the prices of goods, an increase or decrease in their income, or certain government actions affecting the availability of goods, this may affect their desire to purchase the product 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 strive to purchase a product in large quantities today, for fear of losing the opportunity to buy it in the future when its price increases. The result of rush demand will be a shift of schedule D 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. Thus, during the year there are three “peaks” and three “troughs” of demand. The first “peak” is the end of December - the beginning of January (New Year 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 occurs in August - September (the period of mass holidays, the time of preparation for the new school year). Cyclicity also exists during the month - there are two “peaks” - advance payment and salary. During the week, demand increases before the weekend.

So, demand is influenced by both price and non-price factors. In this regard, changes in demand that occur under the influence of price and non-price factors should not be confused. When there is a change in demand, the demand curve shifts, since in this case, at each price, a different (more or less) quantity of the product is demanded. Changes in demand can only occur if non-price determinants of demand change. When all non-price factors are constant and do not change, and the price of the product either increases or decreases, then we move from one relationship “price-quantity of demanded products”, other things being equal, according to the law of demand, to another, new relationship “price-quantity of demanded products” " Accordingly, when the price decreases from P 1 to P 2, a shift occurs from point A to point B of the same demand curve. In such cases, due to the action of the law of demand, only a change in the magnitude (volume) of demand occurs, a movement along the demand curve .

2.2. Non-price supply factors

The supply curve is constructed on the assumption that all factors except market price remain constant. It was already indicated above that in addition to price, many other factors influence the supply volume. They are called non-price. Under the influence of a change in one of them, the quantities supplied change at each price. In this case, they say that there is a change in supply. This manifests itself in the shifting of the supply curve to the right or left.

When supply expands, the curve S 0 shifts to the right and occupies position S 1; if supply narrows, the supply curve shifts to the left to position S 2.

Among the main factors that can change supply and shift the S curve to the right or left are the following (these factors are called non-price determinants of supply):

1. Prices of resources used in the production of goods. The more an entrepreneur must pay for labor, land, raw materials, energy, etc., the lower his profit and the less his desire to offer this product for sale. This means that with an increase in prices for the factors of production used, the supply of goods decreases, and a decrease in prices for resources, on the contrary, stimulates an increase in the quantity of goods supplied at each price, and supply increases.

2. Level of technology. Any technological improvement, as a rule, leads to a reduction in resource costs (reduction in production costs) and is therefore accompanied by an expansion in the supply of goods.

3. Goals of the company. The main goal of any company is to maximize profits. However, firms may often pursue other goals, which affects supply. For example, a firm's desire to produce a product without polluting the environment may lead to a decrease in the quantity supplied of the product at each possible price.

4. Taxes and subsidies. Taxes affect the expenses of entrepreneurs. An increase in taxes means for a company an increase in production costs, and this, as a rule, causes a reduction in supply; Reducing the tax burden usually has the opposite effect. Subsidies lead to lower production costs, so increasing business subsidies will certainly stimulate expansion of production, and the supply curve will shift to the right.

5. Prices for other goods can also affect the supply of a given good. For example, a sharp increase in oil prices can lead to an increase in the supply of coal.

6. Manufacturers' expectations. Thus, producers' expectations of a possible price increase (inflationary expectations) have an ambiguous effect on the supply of goods. Supply is closely related to investments, and the latter react sensitively and, most importantly, difficultly predictably to market conditions. However, in a mature market economy, the expected rise in prices for many goods causes a revival in supply. Inflation in a crisis usually causes a decrease in production and a reduction in supply.

7. Number of producers (degree of market monopolization). The more firms produce a given product, the higher the supply of this product on the market. And vice versa.

Just as in the case of the impact of price and non-price factors on demand, a change in supply is distinguished from a change in the quantity of supply:

A change in non-price factors leads to a shift in the supply schedule itself to the right or left, since in this case producers offer the market a different (more or less) quantity of a given product at each price. Such changes in supply can only occur if non-price determinants of supply change. Here we are talking about supply change ;

Whenever, as a result of some changes in the market situation, the quantity supplied changes, and all the factors influencing it, except the price of product X, remain unchanged, the supply curve for the product remains in the same place, and a movement occurs along the supply curve. In such cases, other things being equal, the quantity of product X offered for sale by producers changes. Here we are talking about a change in the quantity supplied .

2.3. Elasticity of demand. Demand graph

Price elasticity of demand is a category that characterizes the reaction of consumer demand to changes in the price of a product, that is, the behavior of buyers when the price changes in one direction or another. If a decrease in price leads to a significant increase in demand, then this demand is considered elastic. If a significant change in price leads to only a small change in the quantity demanded of the good, then there is relatively inelastic or simply inelastic demand.

The degree of sensitivity of consumers to price changes is measured using the coefficient of price elasticity of demand, which is the ratio of the percentage change in the quantity of products demanded to the percentage change in price that caused this change in demand. In other words, the coefficient of price elasticity of demand

E D P = %ΔQ / %ΔP

Percentage changes in quantity demanded and price are calculated as follows:

%ΔQ = (Q 2 - Q 1) / Q 1 x 100% ; %ΔP = (P 1 - P 2) / P 1 x 100%

where Q 1 and Q 2 are the initial and current volume of demand; P 1 and P 2 - initial and current price. Thus, following this definition, the coefficient of price elasticity of demand is calculated:

If E D P > 1, demand is elastic; The higher this indicator, the more elastic the demand. If E D P< 1 - спрос неэластичен. Если

E D P =1, there is demand with unit elasticity, i.e., a decrease in price by 1% leads to an increase in the volume of demand also by 1%. In other words, a change in the price of a product is exactly compensated by a change in demand for it.

There are also extreme cases:

Absolutely elastic demand: there may be only one price at which the product will be purchased by buyers; the coefficient of price elasticity of demand tends to infinity. Any change in price leads either to a complete refusal to purchase the product (if the price rises) or to an unlimited increase in demand (if the price decreases);

Absolutely inelastic demand: no matter how the price of a product changes, in this case the demand for it will be constant (the same); the price elasticity coefficient is zero.

In the figure, line D 1 shows absolutely elastic demand, and line D 2 shows absolutely inelastic demand.

It is very difficult to identify specific factors influencing the price elasticity of demand, but we can note certain characteristic features inherent in the elasticity of demand for most goods:

1. The more substitutes a given product has, the higher the degree of price elasticity of demand for it.

2. The larger the cost of goods in the consumer’s budget, the higher the elasticity of his demand.

3. The demand for basic necessities (bread, milk, salt, medical services, etc.) is characterized by low elasticity, while the demand for luxury goods is elastic.

4. In the short term, the elasticity of demand for a product is lower than in longer periods, since in long periods entrepreneurs can produce a wide range of substitute goods, and consumers can find other goods that replace this one.

When considering the price elasticity of demand, the question arises: what happens to the company’s revenue (gross income) when the price of a product changes in the case of elastic demand, inelastic demand and demand of unit elasticity. Gross income is defined as the product price multiplied by sales volume (TR= P x Q x). As we see, the expression TR (gross income), as well as the formula for the price elasticity of demand, includes the values ​​of price and volume of goods (P x and Q x). In this regard, it is logical to assume that changes in gross income may be influenced by the price elasticity of demand.

Let us analyze how the seller’s revenue changes if the price of his product decreases, provided that the demand for it is highly elastic. In this case, a decrease in price (P x) will cause such an increase in the volume B of demand (Q x) that the product TR = P X Q X, i.e., total revenue, will increase. The graph shows that the total revenue from the sale of products at point A is less than at point B when selling products at lower prices, since the area of ​​the rectangle P a AQ a O is less than the area of ​​the rectangle P B BQ B 0. At the same time, the area P A ACP B - loss from price reduction, area CBQ B Q A - increase in sales volume from price reduction.

SCBQ B Q A - SP a ACP B - the amount of net gain from a price reduction. From an economic point of view, this means that in the case of elastic demand, a decrease in the price per unit of production is fully compensated by a significant increase in the volume of products sold. If the price of a given product increases, we will face the opposite situation - the seller’s revenue will decrease. The analysis allows us to conclude: if a decrease in the price of a product entails an increase in the seller’s revenue, and vice versa, when the price rises, revenue falls, then elastic demand occurs.

Figure b shows an intermediate situation - a decrease in the price per unit of a product is fully compensated by an increase in sales volumes. Revenue at point A (P A Q A) is equal to the product of P x and Q x b point B. Here we talk about unit elasticity of demand. In this case, SCBQ B Q A = Sp a ACP b a net gain Scbq b q a -Sp a acp b =o.

So, if a decrease in the price of products sold does not lead to a change in the seller’s revenue (accordingly, an increase in price also does not cause changes in revenue), there is a demand with unit elasticity.

Now about the situation in Figure c. In this case SP a AQ a O SCBQ B Q A, i.e., the loss from a price reduction is greater than the gain from an increase in sales volume. The economic meaning of the situation is that for a given product, the reduction in unit price is not compensated by an overall slight increase in sales volume. Thus, if a decrease in the price of a good is accompanied by a decrease in the seller’s total revenue (accordingly, an increase in price will entail an increase in revenue), then we will encounter inelastic demand.

So, a change in sales volume due to fluctuations in consumer demand due to price changes affects the volume of revenue and the financial position of the seller.

As has already been clarified earlier, demand is a function of many variables. In addition to price, it is influenced by many other factors, the main ones being consumer income; prices for interchangeable goods (substitute goods); prices for complementary goods based on this, in addition to the concept of price elasticity of demand, the concepts of “income elasticity of demand” and “cross elasticity of demand” are distinguished.

The concept of income elasticity of demand reflects the percentage change in the quantity demanded of a product due to a particular percentage change in the consumer's income:

where Q 1 and Q 2 are the initial and new volumes of demand; Y 1 and Y 2 - initial and new income levels. Here, as in the previous version, you can use the center point formula:

The response of demand to changes in income allows us to divide all goods into two classes.

1. For most goods, an increase in income will lead to an increase in demand for the product itself, therefore E D Y > 0. Such goods are called ordinary or normal goods, goods of the highest category. Goods of the highest category (normal goods) are goods that are characterized by the following pattern: the higher the level of income of the population, the higher the volume of demand for such goods, and vice versa.

2. For individual goods, another pattern is characteristic: as income increases, the amount of demand for them decreases, i.e. E D Y< 0. Это товары низшей категории. Маргарин, ливерная кол­баса, газированная вода являются товарами низшей категории по сравнению со сливочным маслом, сервелатом и натуральным соком, являющимися товарами высшей категории. Товар низ­шей категории - вовсе не бракованный или испортившийся то­вар, просто это менее престижная (и качественная) продукция.

The concept of cross elasticity allows us to reflect the sensitivity of the demand for one good (for example, X) to a change in the price of another good (for example, Y):

where Q 2 X and Q x x are the initial and new volumes of demand for product X; P 2 Y and P 1 Y are the original and new price of product Y. When using the midpoint formula, the cross elasticity coefficient will be calculated as follows:

The sign of E D xy depends on whether these goods are interchangeable, complementary or independent. If E D xy > 0, then the goods are interchangeable, and the greater the value of the cross-elasticity coefficient, the greater the degree of interchangeability. If E D xy<0 , то X и Y - взаимодополняющие друг друга товары, т. е. «идут в комплекте». Если Е D ху = О, то мы имеем дело с независимыми друг от друга товарами.

2.4. Elasticity of supply. Offer schedule

Similar to the concept of “elasticity of demand,” the concept of “elasticity of supply” is distinguished. Price elasticity of supply is an indicator reflecting the degree of sensitivity of supply to changes in the price of the product offered.

Let's consider the following three cases, corresponding to the graphs S 1, S 2, S 3. The first case (supply is represented by line S1) is a situation where the volume of supply of a product remains practically unchanged regardless of price changes. In this case, there is inelastic supply . An example of a market characterized by inelastic supply is the market for fresh fish. After all, it must be sold in any case at any price, otherwise this product will simply deteriorate and it will be completely impossible to sell it. The second case (the supply graph looks like line S 2) is the opposite situation to the first. Here, a slight change in the price of a product causes a significant change in the volume of supply, i.e. we are talking about elastic supply. The third, intermediate case (line S 3) - a change in the price of a product is fully compensated by a change in the volume of supply. Here we have a supply with unit elasticity.

The price elasticity of supply can be quantified using the coefficient of price elasticity of supply. The coefficient of price elasticity of supply E S P is calculated in the same way as the coefficient of price elasticity of demand E D P , only instead of demand values, supply values ​​are taken:

where Q 1 and Q 2 are the initial and current volume of supply; P 1 and P 2 - initial and current price. Please note that the center point formula is immediately applied here.

Depending on the value of the supply elasticity coefficient, the following are distinguished:

Inelastic supply (Graph S 1): a large percentage change in price leads to a small percentage change in quantity supplied; supply elasticity coefficient is less than 1;

Elastic supply (graph S 2): a small percentage change in the price of a good causes a large impact on supply quantities; supply elasticity coefficient is greater than 1;

Supply with unit elasticity (graph S 3): a change in the price of a good, expressed as a percentage, is exactly offset by a similar percentage change in the quantity supplied; the supply elasticity coefficient is 1;

Absolutely elastic supply (graph S 4): there may be only one price at which the product will be offered for sale; the elasticity coefficient tends to infinity. Any change in price leads either to a complete refusal to produce the product (if the price goes down) or to an unlimited increase in supply (if the price goes up);

Absolutely inelastic supply (graph S 5): no matter how the price of a product changes, in this case its supply will be constant (the same); the elasticity coefficient is zero.

The price elasticity of supply is determined by a number of factors, the most significant of which are the following:

1. The greater the possibility of long-term storage of goods and the lower the costs of storing them, the higher the elasticity of supply.

2. The supply of goods will be elastic if the production technology allows the manufacturer to quickly increase output volumes in the event of an increase in the market price for its products or just as quickly reorient itself to the production of some other product in the event of a deterioration in market conditions and a decrease in the price of the product.

3. The degree of supply elasticity depends on the time factor: the more time the producer has to “adapt” to new market conditions associated with price changes, the more elastic the supply.

Conclusion

In a free market economy, prices are determined by the interaction of supply and demand. Perfect competition is a situation in which there are many buyers and sellers in the market, well aware of market conditions and selling the same goods.

The result of the interaction of supply and demand is the market price, which is also called the equilibrium price. It characterizes the state of the market in which the quantity of demand is equal to supply. To measure the magnitude of changes in demand and supply, the concept of elasticity is used as a measure of the response of one variable to a change in another.

Consideration of the laws of supply and demand, as well as the principle of equilibrium price formation, allows us to draw the following conclusions.

1. In a market economy, there is a mechanism that ensures the coordination of the interests of sellers and buyers in markets: firms can expand and contract production depending on changes in demand, in other words, they are free to choose the volume and structure of output; prices are flexible and change under the influence of supply and demand; the presence of competition, without which the market mechanism of supply and demand will not operate.

2. If some event occurs in the market that disrupts the existing equilibrium (for example, a change in consumer tastes and a corresponding change in demand), then manufacturing firms will necessarily react to changes in market conditions (for example, an increase in demand will lead to an increase in the price of this product, since demand will show producers where to focus their efforts); The process of adaptation of producers and consumers to new conditions will begin, as a result a new market price and a new volume of production will be formed, corresponding to the changed conditions.

Supply and demand are subject to certain laws. According to the law of demand, consumers are willing to purchase more goods at a low price than at a high price; There is an inverse relationship between price and quantity demanded. The law of supply in market conditions provides for a direct relationship between the price and volume of goods offered for sale: at a higher price, the manufacturer is ready to produce and sell a larger quantity of goods than at a low price.

The market brings together buyers and sellers; The equilibrium price and sales volume are established at the point where the intentions of sellers and buyers coincide. Changes in supply or demand caused by non-price factors (changes in consumer preferences, growth in cash income, the introduction of additional taxes, etc.) activate market forces, thanks to which equilibrium in the market is established at a new point.

A market economy should be understood as an economy of demand, in contrast to a directive planned economy, which is an economy of supply (and, moreover, largely forced). This is precisely the fundamental reason for the inefficiency of the planned economy. The consumer was always an inferior subject in it, and the satisfaction of needs was often of a surrogate nature.

With a state distribution system and a limited role of market forces, there can be no question of a balance between supply and demand. The centralized management system turned out to be incapable, as the experience of our country has shown, to respond in a timely manner to changes in supply and demand.

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