Law of supply. Law of supply (Economics) Supply revealing the law of demand

Option 1

Tests

2. In the ordinal theory of utility:

a) utility is measured in absolute units - utils;

b) the consumer cannot measure utility, but can build a system of his preferences;

c) marginal utility is determined by the price that a consumer agrees to pay for a unit of good;

D) the total utility of different consumption bundles is constant.

The substitution effect appears...

a) only in increasing the consumption of a normal good while reducing the price of this good relative to the prices of other goods

b) only in increasing the consumption of an inferior good when the price of this good decreases relative to the prices of other goods

c) in reducing the consumption of any product when the price of this product decreases relative to the prices of other goods

d) in increasing the consumption of any product if this product becomes cheaper relative to other goods.

The law of demand states that...

a) people are willing to buy more goods when their incomes increase;

b) an excess of supply over demand leads to a shortage of goods;

c) at a higher price, people are willing to buy a smaller quantity of a product;

d) demand always determines the supply of goods.

5. The following equilibrium parameters have been established in the market for product X: P E =100 rubles, Q E =200 pieces. After some time they changed: R E = 110 rubles, Q E = 215 pieces. This could be caused by:

a) An increase in demand for product X. c) A decrease in demand for product X.

b) A fall in the supply of goods X. d) An increase in the supply of goods X.

A legal payer of tax per unit of goods sold (purchased) in the amount of 2 rubles. per unit of goods in a competitive market there was previously a seller, but now there is a buyer. As a result...

a) demand for a product will decrease and supply will increase;

b) the equilibrium quantity of the good will not change;

c) the buyer’s expenses associated with the purchase of a unit of goods will not change;

d) all of the above are true.

7. The functions of market supply of goods A, B and C are described by the formulas:

Product A: P = 2 + 10Q

Product B: P = Q - 2

Product B: P = Q

Hence:

a) price elasticity of supply is always the highest for product A and the lowest for product B;

b) price elasticity of supply is the lowest for product A, and the same for goods B and C;

c) price elasticity of supply is highest for product B, and lowest for product A;

d) the price elasticity of supply for good B is different for different quantities of supply.

8. Which of the following goods has the least price elastic demand?

a) Detective A. Christie “Orient Express”.

b) Per share of PAO Gazprom.

c) On a Samsung TV.

d) Salt.

9. Priced at 60 rubles. 20 pieces are sold on the market. goods. The elasticity of demand is equal to Ed=-1.5. If the demand function is linear, then the maximum income is equal to:

a) 1250 rub.

c) 2500 rub.

d) 1680 rub.

10. Which of the following would most likely cause the cigarette supply curve to shift from to ?

Task 1. The table shows the total and marginal utility of consuming good A. The price of good A is 4 rubles.

Task: a) Fill in the table by calculating the missing data; b) How much of good A will a rational consumer acquire if the marginal utility of good B, subject to consumer equilibrium, is 35 util, and the price of good B is 7 rubles? What is the marginal utility of good A?

Task 2. Demand in a competitive market is given by the equation Qd=690-10×P. Suggestion: Qs=-270+30×P. The state introduced a tax on the sale of a unit of goods in the amount of 6 units. The seller pays the tax.

Determine how the market price and market quantity, seller's surplus and buyer's surplus will change. How much tax revenue will the state receive?

Task 3. The functions of supply and demand on the market for a certain product are specified. Qd=150-2P, Qs=3P-100. The state set a quota of 40 units of production. Determine at what price and in what quantity the products will be sold, and how this will affect the profits of the seller and the buyer. Present the solution graphically and analytically.

Option 2

1. The characteristics of an economic good are...

a) the ability to satisfy needs,

b) rarity,

c) value,

d) all of the above are true.

2. What happens when consumer preferences change?

a) the indifference curve shifts to the right or left;

b) the indifference curve changes its slope;

c) the line of budget constraints shifts to the right or left;

d) the line of budget constraints changes slope

3. Setting a lower price limit above the equilibrium price for agricultural products can lead...

a) increase the costs of taxpayers to finance the price support program at a fixed level;

b) to the emergence of a surplus of agricultural products;

c) to increase the costs of storing agricultural products;

d) to all of the above.

4. If the ruble exchange rate falls against the dollar, then as a result of this in the short term in the Russian domestic market...

a) demand for imported goods will decrease;

b) demand for domestic goods will increase;

c) the supply of domestic goods will increase;

d) the supply of imported goods will increase;

e) demand for domestic goods will decrease.

5. If the demand for a product is price inelastic, and the supply is price elastic, then when an additional tax is introduced on this product, the economic burden of the tax...

a) will fall more on the consumer than on the manufacturer;

b) will fall more heavily on the manufacturer than on the consumer;

c) will fall only on the consumer, regardless of elasticity;

d) will fall only on the manufacturer, regardless of elasticity

6. In which of the given options will the total revenue of the company decrease?

a) the firm increases its price when demand is inelastic;

b) the firm increases the price with elastic demand;

c) the firm increases its price when supply is inelastic;

D) the firm lowers its price when demand is elastic.

7. The demand function for apples is given by Qd= -0.2 Rybl. + 0.5 Pears + 0.01 I, where Pear is the price of apples, Pear is the price of pears, I is the consumer’s income. Income is 2000 rubles. per month, the price of one kilogram of apples is 20 rubles, the price of one kilogram of pears is 40 rubles. Therefore, the income elasticity of demand for apples is:

8. Which of the following events will affect the price of cheese differently than the other three?

a) The milk yield of cows has increased.

b) Prices for cattle feed have risen sharply.

c) The consumption of butter instead of sunflower oil has sharply increased.

d) The state introduced import duties on agricultural products to support domestic producers.

9. There are 10,000 identical buyers in the market, the demand function for sugar of each of them is as follows: Pd = 20 – 2Q, where the price is in rubles, and the quantity is in kilograms. There are 100 identical sugar sellers on the market, the supply function of each of them is PS= 2 + 0,01Q. What is the equilibrium price of sugar in the market?

a) 2.1 rub.;

d) 8.95 rub.;

As a result of the reduction in the supply of goods on the market, the price of the goods increased by 1.5 times. At the same time, the total revenue from the sale of goods on the market decreased exactly 1.5 times. Therefore, in this interval...

a) demand is price elastic;

b) demand is price inelastic;

c) demand has unit price elasticity;

d) supply is price elastic;

D) supply is price inelastic.

Task 1. The student reads magazines, listens to music on cassettes and goes to the swimming pool.

The table shows the utility he receives from consuming different amounts of these goods during the week. The price of the magazine is 10 rubles, the price of the cassette is 15 rubles, the cost of one visit to the pool is 20 rubles, the student’s consumer budget is 130 rubles. What set of goods will provide him with maximum utility?

Task 2. The demand for marmalade is described by the equation , and supply, where Q is the quantity of goods (kg), P is its price.

Assignment: a) calculate the equilibrium parameters in the marmalade market; b) prices for marshmallows decreased by 25%. The cross elasticity of demand for marmalade with respect to the price of marshmallows is 0.375. Determine the new demand function for marmalade and the equilibrium parameters in the marmalade market after a decrease in marshmallow prices.

Task 3. The functions of supply and demand on the market for a certain product are specified. Qd=150-2P, Qs=3P-100. The state has established a tax paid by the manufacturer at the rate of 20 units per unit of production. Determine at what price and in what quantity the products will be sold, and how this will affect the profits of the seller and the buyer. Present the solution graphically and analytically.

Option 3

1. Public goods are benefits...

a) the use of which by one consumer does not reduce the quantity of goods available for use by other persons;

b) in respect of which consumption cannot be limited only to those who pay for the good;

c) in relation to which statements a) and b are true);

d) produced exclusively by the state.

2. The consumer's decision to buy a more expensive product instead of a cheaper one is:

a) irrational, because a reasonable buyer always buys a cheaper product;

b) rational if the ratio of marginal utility to price is greater for a cheap product;

c) rational if the ratio of marginal utility to price is greater for an expensive product;

d) irrational, because by buying a cheap product, the consumer increases his income.

3. Usefulness is:

a) the property of goods to benefit society

b) subjective value attributed to goods by people

c) possession of beneficial elements for human health

d) an objective property of goods that is the reason for their production and consumption

4. The law of diminishing marginal utility means that:

a) the ratio of marginal utilities to prices for luxury goods is less than for essential goods;

b) the utility brought by each subsequent unit of goods decreases as the number of goods purchased increases;

c) the ratio of marginal utilities to prices is the same for all goods;

Demand (D- from English demand) – the intention of consumers, secured by means of payment, to purchase a given product.

Demand is characterized by its magnitude. Under quantity of demand (Qd) one should understand the quantity of goods that the buyer is willing and able to purchase at a given price in a given period of time.

The presence of demand for a product means the buyer agrees to pay the specified price for it.

Ask price- ϶ᴛᴏ the maximum price that the consumer agrees to pay when purchasing this product.

There is a distinction between individual and aggregate demand. Individual demand is the demand in a given market of a specific buyer for a specific product. Aggregate demand is the total volume of demand for goods and services in a country.

The quantity of demand is influenced by both price and non-price factors, which can be grouped as follows:

price of the product itself X (Px);
prices for substitute goods (Pi);
consumer cash income (Y);
consumer tastes and preferences (Z);
consumer expectations (E);
number of consumers (N)

Then the demand function, characterizing its dependence on these factors, will look like this:

The main factor determining demand is price. A high price of a product limits the amount of demand for that product, and a decrease in price leads to an increase in the amount of demand for it. From the above it follows that the quantity demanded and the price are inversely related.

Based on all of the above, we come to the conclusion that there is a connection between the price and quantity of goods purchased, which is demonstrated in law of demand: ceteris paribus (other factors influencing demand are unchanged), the quantity of a good for which demand is presented increases when the price of this good falls, and vice versa.

Mathematically, the law of demand has the following form:

Where Qd- the amount of demand for any product; / – factors influencing demand; R- the price of this product.

A change in the quantity of demand for a particular product caused by an increase in its prices can be explained by the following reasons:

1. Substitution effect. If the price of a product increases, consumers try to replace it with a similar product (for example, if the price of beef and pork rises, then the demand for poultry and fish increases) The substitution effect is a change in the structure of demand, which is caused by a decrease in purchases of more expensive goods and replacement its other goods with unchanged prices, since they now become relatively cheaper, and vice versa.

2. Income effect which is expressed in the following: when the price increases, buyers seem to become a little poorer than they were before, and vice versa. For example, if the price of gasoline doubles, then as a result we will have less real income and, naturally, will reduce the consumption of gasoline and other goods. The income effect is a change in the structure of consumer demand caused by a change in income from price changes.

In some cases, certain deviations from the rigid dependence formulated by the law of demand are possible: an increase in price may be accompanied by an increase in the quantity of demand, and a decrease in price may lead to a decrease in the quantity of demand, while at the same time it is possible to maintain stable demand for expensive goods.

These deviations from the law of demand do not contradict it: rising prices can increase the demand for goods if buyers expect their further increase; lower prices may reduce demand if they are expected to fall even further in the future; the acquisition of consistently expensive goods is associated with the desire of consumers to invest their savings profitably.

Demand can be depicted in the form of a table showing the quantity of a good that consumers are willing and able to buy during a certain period. By the way, this dependence is called demand scale.

Example. Let us have a demand scale reflecting the state of affairs on the potato market (Table 3.1)

Table 3.1. Demand for potatoes

At each market price, consumers will want to buy a certain amount of potatoes. If the price decreases, the quantity demanded will increase, and vice versa.

Based on these data, you can build demand curve.

Axis X let's put aside the quantity of demand (Q), along the axis Y- price (R) The graph shows several options for the demand for potatoes depending on their price.

By connecting these points, we get the demand curve (D), having a negative slope, which indicates an inversely proportional relationship between price and quantity demanded.

Based on all of the above, we come to the conclusion that the demand curve shows that, while other factors influencing demand remain constant, a decrease in price leads to an increase in the quantity demanded, and vice versa, illustrating the law of demand.

Figure No. 3.1. Demand curve.

The law of demand also reveals another feature - diminishing marginal utility since the decrease in the volume of purchases of goods occurs not only due to an increase in prices, but also as a result of the saturation of the needs of buyers, since each additional unit of the same product has a less and less useful consumer effect.

Offer. Law of supply

The offer characterizes the seller’s willingness to sell a certain quantity of goods.

There are two concepts: supply and quantity supplied.

Sentence (S- sapply) – ϶ᴛᴏ the willingness of producers (sellers) to supply a certain amount of goods or services to the market at a given price.

Supply quantity- ϶ᴛᴏ the maximum quantity of goods and services that producers (sellers) are able and willing to sell at a certain price, in a certain place and at a certain time.

The supply value must always be determined for a specific period of time (day, month, year, etc.)

Similar to demand, the quantity of supply is influenced by many both price and non-price factors, among which the following can be distinguished:

price of the product itself X(Px);
resource prices (Pr), used in the production of goods X;
technology level (L);
company goals (A);
amounts of taxes and subsidies (T);
prices for related goods (Pi);
Manufacturers' expectations (E);
number of goods manufacturers (N)

Then the supply function, constructed taking into account these factors, will have the following form:

Do not forget that the most important factor influencing the quantity of supply is the price of the product. The income of sellers and producers depends on the level of market prices, so the higher the price of a given product, the greater the supply, and vice versa.

Offer price- ϶ᴛᴏ the minimum price at which sellers agree to supply this product to the market.

Assuming that all factors except the first remain unchanged:

we get a simplified proposal function:

Where Q- the amount of supply of goods; R- the price of this product.

The relationship between supply and price is expressed in law of supply the essence of which is essentially that The quantity supplied, other things being equal, changes in direct proportion to the change in price.

The direct response of supply to price is explained by the fact that production responds quite quickly to any changes occurring in the market: when prices increase, commodity producers use reserve capacity or introduce new ones, which leads to an increase in supply. Except for the above, the presence of a tendency towards rising prices attracts other producers to this industry, which further increases production and supply.

Do not forget that it will be important to say, ɥᴛᴏ in short term An increase in supply does not always follow immediately after an increase in price. Everything depends on the available production reserves (availability and workload of equipment, labor, etc.), since the expansion of capacity and the transfer of capital from other industries usually cannot be carried out in a short time. But in long term an increase in supply almost always follows an increase in price.

The graphical relationship between price and quantity supplied is called the supply curve S.

The supply scale and supply curve for a good shows the relationship (other things being equal) between the market price and the quantity of the good that producers want to produce and sell.

Example. Let's say we know how many tons of potatoes can be offered by sellers on the market in a week at different prices.

Table 3.2. Potato offer

This table shows how many goods will be offered at the minimum and maximum prices.

So, at a price of 5 rubles. For 1 kg of potatoes a minimum quantity will be sold. At such a low price, sellers may sell another product that is more profitable than potatoes. As the price increases, the supply of potatoes will also increase.

Based on the data in the table, a supply curve is constructed S, which shows how much of a good producers would sell at different price levels R(Fig. 3.2)

Figure No. 3.2. Supply curve.

Changes in demand

A change in demand for a product occurs not only due to changes in prices for it, but also under the influence of other, so-called “non-price” factors. Let's study these factors in more detail.

1. Cash income of consumers. If the monetary income of consumers increases, then the quantity of goods purchased also increases, and vice versa, if the income of buyers decreases, then at the same prices the volume of purchases made decreases. This rule applies to normal goods.

Normal product- a product for which the demand increases with the growth of consumer income.

Inferior commodity- a product for which the demand for which falls as the income of buyers increases, this includes cheap, low-quality things, for example, cheap sausages, low-quality clothing, etc.

2. Prices and availability of other goods and services, among which are interchangeable (substitute goods) and complementary goods (complementary goods) For interchangeable goods, it is characteristic that an increase in the price of one of the goods leads to an increase in demand for the other. For example, an increase in meat prices may cause an increase in the demand for fish, and the demand for tea may increase if coffee is not available to all segments of the population. It is worth saying that for complementary goods, an increase in the price of one product leads to a decrease in demand for another. For example, an increase in gasoline prices will cause a decrease in the demand for cars, and an increase in the price of cameras will lead to a decrease in the demand for photographic film.

3. Tastes and preferences of consumers. The development of production, fashion, cultural and historical features influence the tastes and preferences of people. It is important to know that competition among consumers, consumer psychology (a person strives to buy a product that all his friends buy), etc. also play a big role.

4. Buyer expectations. Here they distinguish: expectations and forecasts associated with possible changes in prices (if prices for some product are expected to rise, then this causes an increase in demand for it at the moment); expectations and forecasts associated with the influence of non-price factors (for example, the expectation of a better quality product)

5. Number of buyers. Obviously, the more people consuming a product, the higher the demand for it. Accordingly, an increase (decrease) in the number of buyers causes an increase (decrease) in demand.

6. Special factors- rains increase the demand for umbrellas, in winter the demand for skis and sleds increases, etc.

When considering demand, it is critical to distinguish between changes in the quantity demanded and demand itself.

Change quantity of demand occurs when the price of a given product changes and is expressed only by movement along the points of the demand curve (along the demand line)

Non-price factors cause changes in the demand for goods regardless of their price level. Graphically, ϶ᴛᴏ may look like this: a change in non-price factors causes the demand curve to shift to the left or right, showing a change in the quantity of goods purchased at the same price.

An increase in demand caused by some non-price factor can be shown by a shift of the entire demand curve to the right and up, and a decrease in consumer demand will be illustrated by a shift of the demand curve to the left and down (Figure 3.3)

Figure No. 3.3. Shift in the demand curve.

Changes in offer

Changes in supply, as well as demand, are influenced by both price and non-price factors. When the price of a product changes, the starting point of the market situation moves along the supply curve, i.e., a change occurs supply size.

Non-price factors influence changes in the entire supply functions,϶ᴛᴏ can be visually represented as a shift of the supply curve to the right - when supply increases, and to the left - when it decreases (Fig. 3.4)

Figure No. 3.4. Shift in supply curve.

Let's study in more detail some non-price factors affecting supply.

1. Production costs (or production costs) If production costs are low compared to market prices, then it is profitable for manufacturers to supply goods in large quantities. If they are high compared to the price, firms produce goods in small quantities, switch to other products, or even leave the market.

Production costs are primarily determined prices for economic resources: raw materials, materials, means of production, labor - and technical progress. It is clear that rising resource prices have a major impact on production costs and output levels. For example, when in the 1970s. Oil prices have risen sharply, resulting in higher energy prices for producers, increasing their production costs and reducing their supply.

2. Note that production technology. This concept covers everything from genuine technical breakthroughs and better use of existing technologies to the usual reorganization of work processes. Improved technology makes it possible to produce more products with fewer resources. Note that technological progress also allows you to reduce the amount of resources required for the same output. For example, today manufacturers spend much less time producing one car than 10 years ago. Advances in technology allow car manufacturers to profit from producing more cars for the same price.

3. Taxes and subsidies. The effect of taxes and subsidies will be in different directions: increasing taxes leads to an increase in production costs, increasing the price of production and reducing its supply. Tax cuts have the opposite effect. Subsidies and subsidies make it possible to reduce production costs at the expense of the state, thereby contributing to the growth of supply.

4. Prices for related goods. Market supply largely depends on the availability of interchangeable and complementary goods on the market at reasonable prices. For example, the use of artificial raw materials, which are cheaper than natural ones, makes it possible to reduce production costs, thereby increasing the supply of goods.

5. Manufacturers' expectations. Expectations of future price changes for a product may also affect a manufacturer's willingness to supply the product to the market. For example, if a manufacturer expects prices for its products to rise, it can begin to increase production capacity today in the hope of making a profit later and hold the product until prices rise. Information about expected price reductions may lead to an increase in supply now and a decrease in supply in the future.

6. Number of commodity producers. An increase in the number of producers of a given product will lead to an increase in supply, and vice versa.

7. Special factors. For example, certain types of products (skis, roller skates, agricultural products, etc.) are greatly influenced by the weather.

1. Demand is the intention of consumers, secured by means of payment, to purchase a given product. Quantity of demand is the quantity of a good that the buyer is willing and able to purchase at a given price in a given period of time. According to the law of demand, a decrease in price leads to an increase in the quantity demanded, and vice versa.

2. Supply - the willingness of producers (sellers) to supply a certain amount of goods or services to the market at a given price. The quantity of supply is the maximum quantity of goods and services that producers (sellers) are willing to sell at a certain price during a certain period of time. According to the law of supply, an increase in price leads to an increase in the quantity supplied, and vice versa.

3. Changes in demand are caused by both price factors - in this case there is a change in the quantity of demand, which is expressed by movement along the points of the demand curve (along the demand line), and non-price factors, which will lead to a change in the demand function itself. On the graph, ϶ᴛᴏ will be expressed by a shift of the demand curve to the right if demand is growing, and to the left if demand is falling.

4. A change in the price of a given product affects a change in the supply of that product. Graphically, ϶ᴛᴏ can be expressed by moving along the line of the sentence. Non-price factors influence changes in the entire supply function; they can be visually represented as a shift of the supply curve to the right when supply increases, and to the left when it decreases.

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Demand

Non-price factors affecting demand:

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

In a number of microeconomics courses, the law of demand is formulated more strictly: If the demand for a good increases with income, then with an increase in the price of this good, the demand for it should decrease.

This amendment is due to the existence of Giffen goods, the amount of demand for which increases as prices rise. But for the vast majority of cases (due to the rarity of Giffen goods), the above pattern applies.

Elasticity of demand

Elasticity of demand is an indicator expressing fluctuations in aggregate demand caused by changes in prices for goods and services. Elastic is demand that has formed under the condition that the change in its volume (in %) exceeds the percentage expression of the price decrease.

If the indicators of a fall in prices and an increase in demand, expressed as a percentage, are equal, that is, an increase in the volume of demand only compensates for the decrease in the price level, then the elasticity of demand is equal to one.

When the degree of price reduction exceeds the demand for goods and services, demand is inelastic. Consequently, the elasticity of demand is an indicator of the degree of sensitivity (reaction) of consumers to changes in the price of a product.

Elasticity of demand can be associated not only with changes in the price of a product, but also with changes in consumer income. Therefore, a distinction is made between price elasticity and income elasticity. There is also demand with unit elasticity. This is a situation in which both income and quantity demanded change by the same percentage, so that total income remains constant as price changes.

The reaction of consumers to changes in the price of a product can be strong, weak, or neutral. Each of them generates a corresponding demand: elastic, inelastic, single. Options are possible when demand turns out to be completely elastic or completely inelastic.

The elasticity of demand is measured quantitatively through the elasticity coefficient using the formula:

K o = Q P (\displaystyle K_(o)=(\frac (Q)(P)))

K o - demand elasticity coefficient
Q - percentage change in sales quantity
P - percentage change in price

Typically, there are products with different price elasticities. In particular, bread and salt are examples of inelastic demand. Raising or lowering their prices generally does not affect the quantity of their consumption.

Knowing the degree of elasticity of demand for a product is of great practical importance. For example, sellers of a product with high elasticity of demand may lower prices in order to sharply increase sales volume and make more profit than if the price of the product were higher.

For goods with low elasticity of demand, such pricing practice is unacceptable - when the price decreases, sales volume will change little and will not compensate for lost profits.

If there are a large number of sellers, the demand for any product will be elastic, since even a slight increase in price by one of the competitors will force consumers to turn to other sellers who offer the same product cheaper.

Demand curve

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.

Market influence

All producers (sellers) on the market are united by supply: at a low price, the seller will offer less goods or can hold them back, at a high price, they will offer more goods; at very high levels, it will try to maximize production. This is how the supply price is formed - the minimum price at which sellers are willing to sell their goods...

Offer

Offer- the ability and desire of the seller (manufacturer) to offer their goods for sale on the market at certain prices. This definition describes the proposal and reflects its essence from the qualitative side. In quantitative terms, supply is characterized by its size and volume. Volume, quantity of supply is the amount of a product (goods, services) that the seller (manufacturer) is willing, able and able, in accordance with availability or productive capabilities, to offer for sale on the market over a certain period of time at a certain price.

Like the volume of demand, the quantity of supply depends not only on price, but also on a number of non-price factors, including production possibilities (see Production Possibility Curve), the state of technology, resource supply, price levels for other goods, and inflation expectations.

Law of supply

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 complimentary (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

Elasticity of supply

Elasticity of supply- an indicator that reproduces changes in aggregate supply that occur in connection with rising prices. In the case when the increase in supply exceeds the increase in prices, the latter is characterized as elastic (elasticity of supply is greater than one - E> 1). If the increase in supply is equal to the increase in prices, supply is called unit, and the elasticity indicator is equal to one (E = 1). When the increase in supply is less than the increase in prices, the so-called inelastic supply is formed (elasticity of supply is less than one - E<1). Таким образом, эластичность предложения характеризует чувствительность (реакцию) предложения товаров на изменения их цен.

Supply elasticity is calculated through the supply elasticity coefficient using the formula:

K m = G F (\displaystyle K_(m)=(\frac (G)(F)))

K m - supply elasticity coefficient
G - percentage change in the quantity of goods offered
F - percentage of price change

The elasticity of supply depends on factors such as the specifics of the production process, the production time of the product and its ability to be stored for a long time. Features of the production process allow the manufacturer to expand production of a product when the price increases, and when its price decreases, it switches to the production of other products. The supply of such a product is elastic.

The elasticity of supply also depends on the hour factor, when the manufacturer is not able to quickly respond to price changes, since additional production of the product requires significant time. For example, it is almost impossible to increase the production of cars in a week, although their price can increase many times over. In such cases, supply is inelastic. For a good that cannot be stored for a long time (for example, products that spoil quickly), the elasticity of supply will be low.

Many economists identify the following factors that change supply:

Changes in production costs due to resource prices, changes in taxes and subsidies, advances in science and technology, and new technologies. Reducing costs allows the manufacturer to deliver more goods to the market. An increase in cost leads to the opposite result - supply decreases.
Changes in prices for other goods, in particular for substitute goods.
Individual tastes of consumers.
Prospective expectations of manufacturers. With forecasts for future price increases, producers may reduce supply in order to soon sell the product at a higher price, and conversely, the expectation of falling prices forces producers to get rid of the product as soon as possible so as not to incur losses in the future.
Number of producers directly affects supply, since the more suppliers of goods, the higher the supply and vice versa, with a decrease in the number of producers, supply decreases sharply.

Offer- this is a set of goods, products, services offered by the manufacturer at a given price in a given period of time for sale.

There are 5 elements of a proposal:

1) resources (raw materials, materials).

2) goods for industrial purposes (equipment, machines).

3) labor (hired).

4) capital (financial and material).

5) consumer goods:

a) durable product (cars, apartments, refrigerators);

b) non-durable product (food, household chemicals);

c) services (health care, tourism, entertainment).

The composition of the offer is constantly changing, the volume is increasing, updated, including all new products (information, license, patents). And each product group generates its own special, local market.

Similar to the law of demand in a market economy, the law of supply also operates: the quantity of supply (Q) is directly dependent on the direction of change in the price level (P).

Graph 3. Law of supply.

Law of supply- This is a direct relationship between the price level and the quantity of supply.

Non-price supply factors:

level of production technology.

taxes and subsidies.

sellers' expectations on the dynamics of demand, prices and income.

number of sellers.

4. Elasticity of supply and its measurement.

Price elasticity of supply- change in the quantity of supply under the influence of price dynamics.

If a small change in price causes a significant change in quantity supplied, this is called elastic supply.

If even a very large change in price only slightly changes the quantity supplied, then such supply is called inelastic.

Elasticity is measured by the ratio of the percentage change in supply to the percentage change in price; this change is called price elasticity coefficient of supply.

To price.el.pre-i= =

If TOprice.el.pre-i1-supply is considered elastic

If TOprice.el.pre-i1 - then supply is considered inelastic

If TOprice.el.pre-i= 1 – then the unit elasticity of supply

Graph 4. Price elasticity of supply.

Factors influencing the elasticity of supply:

the maximum possible manufacturer's cost for a given product.

quantity, quality, price of goods - substitutes (substitutes).

5. Interaction of supply and demand. Equilibrium price.

In the market there are sellers who set the supply price and buyers who determine the demand price; each of the market participants tries to benefit.

Salesman(manufacturer) - sell the product at the highest possible price in order to obtain the highest possible profit.

Buyer(consumer) - purchase a product at a price with maximum utility.

Under the influence of supply and demand, an equilibrium price is formed in the market, which satisfies both the buyer and the seller.

flaw

Graph 5. Equilibrium price.

When the price rises to level P 1, the desires of sellers and buyers do not coincide. Buyers will be willing to purchase the product in quantity Q1, and sellers will be able to offer it in quantity Q2.

A situation of overproduction (excess, excess) arises in the market, since the supply of goods will exceed the demand for it.

If the price is below the level of the equilibrium price P 2, then a situation of underproduction (deficit, shortage) arises in the market, since demand for the product will exceed supply.

The law of market pricing operates in the market, according to which the price in a free competitive market tends to a level at which demand is equal to supply.

Terminology

Demand- one of the sides of market pricing reflects the desire to purchase a certain volume of goods at a given price.

Law of Demand- other things being equal, an increase in price causes a decrease in the quantity demanded; a decrease in price is an increase in the quantity demanded, that is, it reflects the inverse relationship between price and quantity of goods.

Non-price factors affecting demand:

1. Level of income in society.

2. Market size.

3. Fashion, seasonality.

4. Availability of substitute goods (substitutes)

5. Inflation expectations

Offer- reflects the desire of producers to introduce a certain number of goods to the market at a given price.

Law of supply- other things being equal, an increase in price leads to an increase in the quantity of supply; a decrease in price means a decrease in the quantity of supply.

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

Description

Market economy can be viewed as an endless interaction of supply and demand, where supply reflects the quantity of goods that sellers are willing to offer for sale at a given price at a given time.

Law of supply- an economic law, according to which the supply of a product on the market increases with an increase in its price, all other things being equal (production costs, inflation expectations, quality of the product).

Essentially, the law of supply expresses the concept that at high prices, more goods are supplied than at low prices. If we imagine supply as a function of price and the quantity of goods supplied, the law of supply characterizes the increase in the supply function throughout the entire domain of definition.

Examples

Food

To circumvent the law of supply and demand in the European Union, the overproduction of oil is stored in warehouses, on the so-called “butter mountain” (German). Butterberg). Thus, supply is artificially restrained and the price remains stable.)

Stocks, currency, financial pyramids

Links

Supply and demand - Article in the Rukonomist Encyclopedia on the website Ruconomics.com

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See what the “Law of Demand” is in other dictionaries:

An economic law, according to which an increase in prices leads to a decrease in the quantity of demand for goods, all other things being equal, i.e. The volume of demand for goods and the level of prices for them are inversely proportional. Dictionary business... ... Dictionary of business terms

An economic law proposed by the British economist A. Marshall, according to which the amount of demand for a product or service over a certain period of time is inversely proportional to the amount of its price. Dictionary of business terms. Akademik.ru... ... Dictionary of business terms

The law according to which an increase in prices leads to a decrease in the quantity demanded of goods, all other things being equal. Raizberg B.A., Lozovsky L.Sh., Starodubtseva E.B.. Modern economic dictionary. 2nd ed., rev. M.: INFRA M. 479 p.. 1999 ... Economic dictionary

LAW OF DEMAND- – a law according to which there is an inversely proportional relationship between demand and price, i.e. under certain economic conditions, an increase in demand affects the reduction of prices and, conversely, a decrease in demand leads to an increase in prices. This law... ... Concise Dictionary of Economist

Encyclopedic Dictionary of Economics and Law

law of demand- a law according to which an increase in prices leads to a decrease in the quantity demanded for goods, all other things being equal... Dictionary of economic terms

LAW OF DEMAND- LAW OF DEMAND This law refers to the quantity of goods that buyers are willing to purchase. Economists argue that there is a predictable inverse relationship between the price of a good and its quantity for which there is demand3.s.... ... Encyclopedia of Banking and Finance

Law of Demand- the essence of the law is that an increase in the market price, other things being equal, reduces the quantity demanded, on the contrary, a decrease in the market price increases the quantity demanded... A brief dictionary of basic forestry and economic terms

Law of Demand- consists in the fact that, other things being equal, the lower the price of this product, the higher the quantity of demand for a product, and vice versa, the higher the price, the lower the quantity of demand for the product... Economics: glossary

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