Supply and demand. Demand, supply, market price

Definition

Supply curve

Change suggestions

Value change suggestions

Supply curve shifts

Interaction of supply and demand

The law of supply is 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, inflationary expectations, product quality). The nature of the law of supply lies in the fact that with an increase in prices, it becomes more profitable for the producer, the seller to sell large quantity product.

Law of supply

economic law according to which, as the price of a product increases, the amount of its supply on the market increases, and with concession in price reduced supply, other things being equal.

The supply curve is a graphic representation of the relationship between

Market prices for goods and services;

The quantity of goods and services offered on the market by manufacturers.

The positive slope of the supply curve reflects the fact that a price increase stimulates additional production of goods and services. The supply curve is a line that reflects all the ratios of the quantity of goods offered and the equilibrium price; characterizes the supply of the good. A shift in the supply curve means a change in supply. An increase in supply corresponds to a shift in the supply curve to the right, and a decrease in supply corresponds to a shift in the supply curve to the left.

A comparison of the supply curves S1 and S2 at point A shows that the curve S1 in comparison with the curve S2 is more "sloping" and has greater elasticity.

An analysis of supply curves shows that profit of a businessman increases with growth and decreases with a decrease in the equilibrium price of the product RA for any values ​​of supply elasticity. Note that the demand curves reflect the opposite relationship: profit businessman increases with a decrease in the equilibrium price RA with elastic demand and decreases with inelastic demand. So, if the equilibrium price has risen to the value P1, then at the equilibrium point B1 the profit businessman will be P1 x QB1, at point C1 the profit is equal to P1 x QB1.

Since QB1 > QC1, then the profit at point B1 on the elastic curve S1 is greater than at point C1. However, a higher elasticity of supply also implies a higher rate of decrease in a businessman's income if the equilibrium price decreases (compare points C2 and B2 at price P2). From this follows the answer to the question why a decrease in the price of a good as a result of a change in demand causes small producers, because the supply of their goods is more elastic in comparison with the goods of large firms.

We summarize the above with the following conclusions:

in the market of any good, there are two streams: consumers of goods, presenting for a certain amount of goods, and producers of goods, offering different amounts of goods;

the volume of goods offered depends on a number of factors, the main of which is the price of the good;

The supply of a good is illustrated by a supply curve;

any shift in the supply curve means a change in supply. An increase in supply corresponds to a shift in the supply curve to the right, and a decrease in supply corresponds to a shift to the left. "supply" means the desire of producers to produce and sell certain goods and services.

Supply is the quantity of a product or service that is offered for sale at a given price in a given time period.

For example, we can say that the quantity supplied for product X at price Y is 1,000 per week.

According to the law of supply, there is a direct relationship between price and supply, i.e. supply is greater at high prices and less at low prices.

If the demand for a given product increases, it becomes rarer and its price rises. Therefore, its production becomes more profitable. The quantity supplied increases because rising profits will stimulate an increase in production. Higher prices and profits will attract this and other companies.

When demand falls, the price of a product will fall, which will mean that at the current price in the market this product is in excess. Organizations will be forced to drop prices to get rid of the surplus. At lower prices, production will become less profitable, so the organization will reduce release of this product, and its supply will decrease. A fall in price could force less efficient organizations out of business. industries.

The law of supply shows that producers want to produce and offer for sale more of their product at a high price than they would like to do at a low price.

Supply curve

As with the law of demand, let's represent the law of supply in a graphical representation. The plotting technique is the same as described above, but, of course, the quantitative data and the relationships that arise between them are different. This means that there is a direct relationship between the yen and the supply.

The shape of the supply curve is determined by the desire of firms to maximize profits. This assumption helps to understand why the supply curve is directed upwards from left to right, i.e. why companies are willing to offer more goods at higher prices.

Supply Determinants

Price is the main determinant of the supply of any product. However, there are other (let's call them non-price) determinants, or factors that affect the amount of supply. If one of the non-price determinants actually changes, the position of the supply curve will change.

Other determinants of supply include:

1) resource prices. The value of the organization's supply is based on the cost of production. The following regularity operates here, lowering the prices for resources reduces production costs and increases supply, i.e. will shift the supply curve to the right. Conversely, an increase in resource prices will increase production costs and reduce supply, i.e. will shift the supply curve to the left.

2) Technology. Improvement in technology means that a unit of output can be produced more efficiently, i.e. with less resources.

3) taxes and grants. Enterprises consider most taxes as a cost of production. Therefore, raising taxes on, say, sales or property increases the cost of production and reduces supply. On the contrary, subsidies are considered a "tax in reverse". When it subsidizes the production of a product, it actually reduces costs and increases its supply.

4) prices for other goods. Changes in the prices of other goods can also shift the supply curve of a good. Price drop for wheat can induce a farmer to grow and sell more corn at each possible price. Conversely, an increase in the price of wheat can force farmers to reduce production and supply corn. A sporting goods company may cut the supply of basketballs when the price of footballs rises.

5) Expectations. Expectations of changes in the price of a product in the future can also affect the desire of the manufacturer to supply the market at the present time. For example, the expectation of a significant increase in the price of a car company's products can induce organizations to increase production capacity and thereby increase supply.

6) Number of sellers. Given the volume of production of each company, the greater the number of suppliers, the greater the market supply. As you enter industry more firms, the supply curve will shift to the right. The smaller the number of firms in the industry, the smaller the market supply. This means that as firms exit the industry, the supply curve will shift to the left.

The difference between a change in supply and a change in the quantity supplied is the same as the difference between a change in demand and a change in the quantity demanded.

A change in supply is expressed as a shift in the supply curve: an increase in supply shifts the curve to the right, a decrease in supply shifts it to the left.

A change in a supply is caused by a change in one or more of the determinants of the supply. In contrast, a change in the quantity supplied means moving from one point to another point on a constant supply curve. The reason for this movement is a change in the price of the commodity in question.

Change of offer

Let us now consider the impact on supply of each of these determinants.

Resource prices. There is the closest relationship between production costs and supply. An organization's supply curve is based on production costs; for additional units of the product should receive higher prices, since the production of these additional units is more expensive. It follows that a decrease in resource prices will reduce production costs and increase supply, that is, it will shift the supply curve to the right. Example: if prices for seeds and fertilizers go down, supply can be expected to increase corn. Conversely, an increase in resource prices will increase the cost of production and reduce supply, i.e. shift the supply curve to the left. Example: an increase in the price of iron ore and coke increases the cost of producing steel, and leads to a reduction in its supply.

Technology. Improvement in technology means that new knowledge makes it possible to produce each unit of production with fewer resources. At data resource prices, this will lead to a decrease in production costs and an increase in supply. Example: Recent powerful breakthroughs in superconductivity open up prospects for transmission electrical energy with little or no loss. At present, when transmitting electricity through copper wires its loss is about 30%. What is the possible consequence said discovery? A significant reduction in production costs and an increase in the supply of a number of products that require a large number of electricity.

taxes and subsidies. Companies treat most taxes as a cost of production. Therefore, raising taxes, say sales tax or property tax, increases the cost of production and reduces supply. Subsidies are considered a "tax in reverse". When state subsidizes the production of a product, it actually reduces costs and increases its supply.

Prices for other goods. Changes in the prices of other goods can also shift the supply curve of a good. Price reduction for wheat can induce the farmer to grow and sell more corn at every possible price. Conversely, an increase in the price of wheat may force farmers to reduce production and supply of corn. A sporting goods organization may reduce the supply of basketballs when the price of footballs rises.

Expectations. Expectations of changes in the price of a product in the future can also affect the desire of the manufacturer to supply the product to the market at the present time. However, it is difficult to draw conclusions about how the expectations of, say, higher prices will affect the current supply of goods. Farmers may delay taking their current corn crop to market in anticipation of higher prices in the future. This will cause the current offer to be shortened. Equally the expectation of significant price increases in the near future for IBM products could reduce the current supply of these products. On the other hand, in many manufacturing industries, the expectation of higher prices can encourage companies to increase production capacity and thereby cause an increase in supply.

The number of sellers. For a given output of each organization, than more number suppliers, the greater the market supply. As new firms enter, the supply curve will shift to the right. The smaller the number of firms in an industry, the smaller the market supply. This means that as firms exit the industry, the supply curve will shift to the left.

Example. The United States and recently introduced restrictions on commercial fishing for haddock to restore its population. The requirement that every fishing boat stay in the dock 80 days a year forced some anglers to give up fishing and reduced the supply of haddock.

Change in the size of the offer

The difference between a change in supply and a change in the quantity supplied is the same as the difference between a change in demand and a change in the quantity demanded. A change in supply is expressed as a shift in the entire supply curve. An increase in supply shifts the curve to the right, while a decrease in supply shifts it to the left. A change in a supply is caused by a change in one or more determinants of the supply. Economists use the term "supply" to refer to a scale or curve. Therefore, changes in supply must mean that the whole scale has changed and that the curve has shifted in some direction.

In contrast, a change in the quantity supplied means moving from one point to another on a constant supply curve. The reason for this movement is a change in the price of the commodity in question.

Movement along the supply curve

Why does the supply curve have a positive slope? Why do producers, other things being equal, plan to offer more of a product when the prevailing market price is higher than when the price is lower?

One can try to find explanations for all these problems without delving into microeconomic theory, but using only ordinary common sense.

One explanation is that the positive slope of the curve expresses the response of producers to market incentives. When the price of a chicken rises, farmers have an incentive to devote more time and energy to raising chickens. Farmers for whom poultry farming was a side occupation can make it their main occupation. It is not people who can decide to start chicken production and enter this market for the first time. The same patterns exist in any market. If parents cannot find a nanny for their child, what do they do? That's right, they increase the fee. If the sawmill cannot buy enough wood, the owner raises the purchase price of the logs, and so on. Exceptions to this rule are very rare. Another explanation is that the positive slope of the supply curve expresses incremental pros increasing in production at fixed production possibilities.

A furniture factory with a fixed number of machines can produce more chairs by raising the workers' wages so that they use the available equipment overtime. A farmer trying to grow more wheat on a limited amount of land can increase output by increasing the amount of fertilizer and pesticides used, but this only makes sense up to a point, as long as the incremental cost of fertilizer does not exceed up to emission. valuable papers based on these fertilizers.

The positive slope of the supply curve can be explained in terms of the production possibilities frontier and opportunity cost. Let's say that some economic system produces only two products - tomatoes and chickens. Farmers can choose which industry to specialize in, but some farmers have a comparative advantage in tomato production and others in chicken production. In a situation where only tomatoes are produced, the farmers with the greatest comparative advantage in raising chickens (i.e., those who can produce chickens at a comparatively low cost advantage) will start raising chickens even if their market price is low.

As the point moves along the curve, the price of the chicken should advantage that those farmers who have a relatively high opportunity cost also switch to chicken production. The slope of the curve at each point is equal to the opportunity cost of producing additional chickens for a farmer who finds it worthwhile to switch from tomato production to chicken production at that point in the production possibilities frontier.

Each of the explanations given here fits certain circumstances. Taken together, they provide a fairly satisfactory justification for a positively sloping supply curve.

Supply curve shifts

Just as in the case of demand, the effect of a change in the price of chicken, other things being equal, can be shown by movement along the chicken supply curve. This movement is caused by a change in the magnitude of the proposal. A change in any non-price factor results in a shift in the supply curve. This shift is called a change in supply. Marked four important factors, which can lead to a shift in the curve. The significance of each of the factors is explained taking into account the fact that the supply curve reflects the opportunity cost of producing a product or service.

Change of offer. A change in the quantity of a product that producers are willing and able to sell, resulting from a change in the non-price factor, is indicated by a shift in the supply curve.

Technology change. The supply curve is built on the basis of a certain production technology. When businessmen lower the opportunity cost of production by introducing more efficient ones, it becomes profitable to sell more product than before, at any given price.

If we assume that a new breed of chicken has been bred that is growing very fast, and the amount of feed required for production has decreased. With lower unit costs, farmers will be willing to produce more chickens than before at any given price. They may, for example, wish to offer 2.6 billion pounds of chickens to the market at $0.40 per pound. After implementation new technology changes in the price of the chicken will cause movements along the new supply curve.

Resource price changes. Resource prices can also affect demand. An increase in resource prices, ceteris paribus, leads to an increase in the opportunity cost, and therefore reduces by the amount of product that producers planned to sell at a given price. If feed prices remain unchanged at the new level, then any change in chick price will move along the new prev curve. For example, farmers can put the same number of chickens back on the market—2 billion pounds a year—if the selling price rises enough to cover increased feed costs. This will require increasing the price to 0.65 dollar per pound.

Changes in prices for other goods. Changes in the prices of those goods that use the same resources as chickens can also shift the supply curve for chickens. In the old example, farmers could use available inputs to produce chickens or tomatoes. Assume that the price of tomatoes increases while the price of chickens remains at 0.40 dollar per pound. Rising tomato prices give chicken farmers an incentive to divert some of their available labor, land and capital to growing tomatoes. Thus, the effect of an increase in the price of tomatoes can be expressed as a shift in the supply curve for chickens to the left.

Changing expectations. Changing expectations can shift the pre curve in the same way that they shifted the demand curve. Take farming as an example. The farmer chooses which crops to plant based not so much on current prices, but on the prices he expects to be at the time of harvest. harvest.

Proposal is also affected by longer-term considerations. Each crop requires appropriate equipment and technology. Rising prices for tomatoes stimulate the movement of resources into this production. This incentive will be much more effective if farmers expect tomato price increases to be long-term and sustainable. With such an expectation, farmers will seek to buy special equipment and learn how to grow tomatoes.

Movement along curves and curve shifts

The next step in building a supply-demand market model is to put the supply and demand curves in the same coordinate system.

For the demand curve, and for the supply curve, a change in the price of a product causes the point to move along the graph. All possible influences of price changes are, as it were, "embedded" into these curves when they are constructed. Therefore, the price of the product is plotted along one of the coordinate axes.

If you build a two-dimensional coordinate system, then changes in other variables cannot be reflected in the same way. Any change in a variable subject to our other equals assumption is graphically expressed by a shift in the demand or supply curve. (Here we mean the prices of other goods, incomes acquirer, expectations, and any other variables not shown on the chart axes.)

Interaction of supply and demand

Markets convey information in the form of prices: to the people who buy and sell goods and services. Sellers and buyer plan their activity on the basis of this information and your knowledge. As demand and supply curves show, at any given price, people plan to buy or sell certain quantities of a product,

In every market there are many sellers and buyers, each planning their actions independently of the others. When they meet to trade, it turns out that many are unable to fulfill their plans. It is possible that the total quantity of goods that producers plan to buy is greater than the quantity of goods that producers are willing to sell at the current price. In this case, some buyers will have to change plans. It is also possible that the planned sales will exceed the planned consumption at a given price. Then the plans of sellers will change.

Sometimes it happens that the total quantity of the product offered by the manufacturers is exactly the same as the quantity of the product that the pots are planning to buy. If the plans of sellers and buyers coincide, then no one has to change these plans. In this case, the market is in equilibrium.

Supply can be defined as a scale showing the varying amounts of a good that a producer is willing and able to produce and offer for sale on the market at any given price from a range of possible prices over a given period of time. Under the conditions of the commodity form of management, the producer creates goods not for his own consumption, but for exchange, hoping that in return for the sold product he will receive money, at least compensating for its costs of attracting additional resources. In every this moment time, the manufacturer is able to produce and offer for sale different quantities of goods. However, the transition from one quantity to another entails changes in the cost of resources per unit of output. The price at which the product will be sold must reimburse the producer's costs. As the price rises, the manufacturer is compensated for increasing costs per unit of output, and, consequently, conditions are created for his interest in increasing production volumes. In the form of a table, it is possible to present the dependence of the quantity supplied on the price of the goods.

The quantity of a product offered for sale is directly dependent on the unit price. This relationship is called the law of supply.

The curve on the supply graph is a set of points, the coordinates of which correspond to a certain price and the supply value characteristic of it. A price change, ceteris paribus, moves a point on the supply schedule, thereby increasing or decreasing the supply.

A change in the cent of a product affects the quantity supplied by moving the corresponding point on the supply curve. Non-price factors change the supply itself, shifting the curve on the chart to the right or left. Among them, the following are usually distinguished:

Prices for applied resources (under the influence of changes in prices for resources, the supply curve can shift both to the left and to the right. An increase in the price of resources leads to a shift in the supply curve to the left and a reduction in supply. A decrease in resource prices leads to a shift in the curve to the right and increases supply.)

Capital and production technology (the value of production costs can also be affected by the efficiency and effectiveness of the use of resources. The introduction of new equipment and technology leads to an increase in supply.)

On the modern market there is a concept opposite to demand - this is supply. By this term, experts understand the willingness of the seller to immediately sell his product. Manufacturers are the main suppliers of products on the market. Their activities in the formation of prices and the sale of goods are determined by certain goals, the main of which is to maximize profits. Main function offer prices - to ensure their achievement.

The essence of the proposal

Each commodity producer strives to produce goods, the need for which society is experiencing at the moment, that is, based on consumer demand. Thus, all producers in the market contribute to the satisfaction of social needs, forming the so-called supply. This is the ability and desire of the seller to put on the market a certain amount of goods at a given time. Such an opportunity is limited by the volume of production resources, therefore it is unable to satisfy the needs of the whole society at once.

The volume of supply is determined by the volume of production, but not equal to it. The difference between these values ​​is explained by the internal consumption of products, losses during storage and transportation, etc.

Law of supply

The quantity of goods supplied to the market and its cost are united by a direct or positive dependence. The formulation of this dependence is as follows: with equal market characteristics, an increase in the purchase price of a product contributes to an increase in supply, just as its decrease causes a decrease in production volumes. This specific dependence is the main market law.

It is possible to visualize the operation of such a law in reality in three ways: graphical, analytical or tabular.

Let's consider the first option. Plotting on the graph the conditional supply values ​​on the horizontal axis, and prices on the vertical axis and connecting them, we see that the resulting line has a positive slope. Simply put, as the price rises, the quantity of goods on the market increases, and vice versa. This graph is a direct proof of the market law formulated above, defined by such a concept as a supply function.

Supply Determining Factors

The main factors that can regulate the amount of supply are the following non-price determinants:

1. The price of the resources needed for production. The more expensive the raw materials used, the higher the production costs and, accordingly, the lower the profit and the desire of the manufacturer to produce this product. Thus, the supply function and its volume directly depend on the prices of factors of production (their increase leads to a decrease in its volume and, as a result, a decrease in supply).
2. Technology level. Usage state of the art technology production, as a rule, helps to reduce costs and is accompanied by an increase in the volume of goods offered.
3. Firm goals. If the main task of the enterprise is to make a profit, then its activity is aimed at increasing the pace of production. If the goal is, for example, its environmental friendliness - production capacity drops.
4. taxes and subsidies. An increase in taxes leads to an increase in costs, and government subsidies On the contrary, they stimulate producers to increase supply.
5. Changes in prices for other goods. For example, a change in oil prices (in particular, an increase) contributes to a change in the cost of charcoal, in this case upwards.
6. Producer expectations. Constant monitoring of the market sometimes affects the behavior of producers, for example, the expected inflation contributes to a decrease in production. Similarly, the planned increase in prices affects the change in supply, only in the opposite direction.
7. The number of producers of homogeneous goods can also be attributed to factors influencing supply. The more of them, the higher the volume of goods offered in this market.

Offer function

This function is the dependence of the volume of goods entering the market on the factors that determine it. AT broad sense all types of supply functions consist in organizing direct interaction between the production of goods and their consumption, as well as their purchase and sale.

The emerging market demand for a product causes an increase in its production volumes and an improvement in quality, which leads to an increase in the total amount of this product on the market.

Supply curve

The supply curve (or supply function) is a way of graphical representation of the quantity of goods offered in a given market for each price value, with the influence of other factors unchanged. As a rule, this curve is increasing.

To build a graph, you need to draw a line in the coordinate system, connecting the intersection points of the supply and demand lines.

The location and slope of the curve on the graph depend mainly on the size production costs, since no enterprise will work if the profit from the sale of a product does not cover the costs of its release.

Supply curve shifts

An increase in supply contributes to an increase in production, and a decrease in supply leads to their decrease. This dependence is also reflected in the supply schedule: in the first case, it shifts to the right and down, in the second - to the left and up.

The supply function of a good, as well as its curve, involves the use of two different terms, such as "supply quantity" and "supply" itself. The first term is used when we are talking on changes in the volumes of goods supplied to the market due to fluctuations in their prices. If the change in production is caused by other factors, the second term is used.

Also, a shift in the supply curve occurs when the amount of production costs varies: with its growth, the line shifts up by the amount of the difference, and vice versa - with a decrease.

Similar metamorphoses will be noted on the graph in the event of an increase / decrease in taxes, due to their direct relationship to production costs.

Interaction of supply and demand

The retail price of a product on the market, as well as the volume of its production and sales, is determined by the interaction of supply and demand. It is this interaction that determines the functions of supply and demand.

If the price of a product falls below the average, the market responds by increasing consumer demand. Producers, in turn, reduce the output of this product, as its production has become less profitable. Thus, buyers are ready to buy a product, but manufacturers are unable to meet their growing need for it.

The reverse action occurs when prices rise: manufacturers want to put on the shelves as much expensive goods as possible, but buyers do not want to buy it at such a high price.

Equilibrium price

The equilibrium price is the price at which the quantity of goods produced fully satisfies consumer demand for it, that is, the quantity demanded is equal to the quantity supplied. This volume of production is the equilibrium for this market.

If the current price of the goods differs from the one mentioned above, then the activity of sellers and buyers contributes to its achievement. This is explained by the fact that only such a value of the goods ensures the satisfaction of the current needs of society (and this, as we have already noted, is the main function of supply) and the maintenance of an optimal level of production costs.

Supply is one of those produced goods that enter the market with the aim of selling them at prices that satisfy producers. In the market, the dependence of supply on price is direct: the higher the price, the more goods sellers are willing to offer.

The direct relationship between price and quantity supplied is called the law of supply. The dependence of goods produced on the price level can be depicted using the supply curve. The supply curve is a curve showing how much of an economic good producers are willing to sell at different prices at a given time (Fig. 2).

Figure 2. Supply curve

The curve depicted characterizes the price level and the quantity of the good at a certain point in time. It has a positive slope, which indicates the desire of the producer to sell more goods at a higher price.

The volume of supply is determined the total amount offers of goods sold on the market. At higher prices, the profitability of sales increases, which forces sellers to increase the volume of supply. In a free market, an increase or decrease in price by an individual seller does not affect the level of the established market price, although in a mixed market where monopolists participate, the equilibrium can be disturbed first downward in price to conquer the market, and then upward to ruin competitors.

The role of supply is to link production with consumption, sale of goods with purchase. In response to emerging demand, production begins to increase the output of goods, improve their quality, reduce the cost of their manufacture, thereby increasing the total supply on the market.

The bid price is the minimum price at which the seller is still willing to sell his product. Below this price, he cannot give it up, because then he will suffer a loss, and his production will be unprofitable.

A change in supply occurs when other factors that were previously taken as constants change. Among them are:

• · Prices for production resources. They can either stimulate supply growth (if they are declining) or prevent it (if they are growing).
• · Changes in production technology. Improvement in technology makes it possible to produce a unit of production at a lower cost, which leads to a reduction in production costs and an increase in supply.
• · State policy in the field of taxation and subsidies. Taxes increase the cost of production and decrease supply. Subsidies lower production costs and increase supply.
• · Expectations. Expectations of changes in the price of a product in the future may affect the desire of the manufacturer to supply it to the market at the present time.

Proposal as it involves change production process, adapts (adapts) to price changes more slowly than demand. Therefore, the time factor is the most important in determining the elasticity index.

Usually, when assessing the elasticity of supply, the following time periods are considered: instant, short-term, medium-term and long-term.

The instant period is characterized by the fact that already produced goods are subject to sale. The product goes on sale at the established market price, i.e. supply must match demand.

Demand. The law of demand. Factors affecting demand.

Pricing is based on the interaction of sellers and buyers representing supply and demand on the market. A person has a natural desire to consume, but economics deals only with those needs that are embodied in effective demand.

Demand can be defined as the quantity of a good that consumers are willing and able to purchase at a given price over time.

The volume or magnitude of demand for any product is the maximum quantity of this product that according to buy individual, a group of people or the population as a whole in a unit of time under certain conditions. The dependence of the volume of demand on the factors determining it is called the demand function. First of all, the quantity demanded for a product is determined by its price. It is clear that usually people tend to buy cheaper goods, but this does not mean that they are ready to buy goods of lower quality and only cheap ones.

But no matter what high-quality, technically complex or expensive product a person buys, there is still an inverse relationship between the price of the product and the amount of demand for it, i.e. ceteris paribus, the greater the demand for a product, the lower its price, and vice versa, the higher the price, the less demand. This negative relationship is called the law of demand. This dependence can be transformed into a function of demand from price if other factors affecting the volume of demand are taken as constant values. The demand curve shows how the quantity demanded by the consumer changes depending on the level of the price of the product. The change in the volume of demand depending on the change in the price of a product is a movement along the demand curve.

In addition to price, there are other determinants (determinants) of demand, a change in which leads to a shift in the entire demand curve and reflects changes in demand itself. Other factors include:

Changing tastes, fashion buyers;

Change in the number of buyers;

Change in income;

Changes in prices for related products;

Changes in consumer expectations /1,2/.

Resist demand in the market certain offer goods. An offer is understood as someone's willingness to sell a product. Manufacturers are the main suppliers of goods to the market. Their marketing and pricing policy is subject to several goals, the main of which is profit maximization. At the same time, the amount of profit directly depends on the price of products.

There is a positive, or direct, relationship between the price and quantity of the product offered. As prices rise, so does the quantity supplied; as prices fall, so does supply. This specific relationship is called the law of supply.

The law of supply means that, ceteris paribus, there will be more supply at high prices than at low prices. This is because the supplier acts as the recipient of money for the product. For him, the price represents the revenue for each unit of the product, and therefore it serves as an incentive to produce and offer his product for sale on the market. The movement "along the supply curve" and the change in the "volume of supply" occurs under the influence of the price of the goods. The movement of the "supply curve itself" and "change in supply" occurs under the influence of the following non-price factors:

Resource price changes;

Technology changes;

Changes in taxes and subsidies;

Changes in prices for other goods;

Changes in expectations;

Changes in the number of suppliers.

The supply volume is the maximum quantity of any product that a seller or a group of sellers agrees to put up for sale in a unit of time under certain conditions listed above. The dependence of the volume of supply on the factors determining it is called the supply function. The supply function of the price, as well as the demand function, can be determined in analytical, tabular and graphical ways /1,2/.

The goods they need due to the fact that these goods are offered for sale. But what determines the volume of goods offered for sale?

Offer amount- the volume of goods of a certain type (in natural terms), which sellers are ready (want and able) to offer to the market during a certain period at a certain level of the market price for this product.

Studying the actions of sellers in the market, it is easy to see that the amount of goods that they offer for sale (the amount of supply) also directly depends on the price level that is developing in trade.

Usually, the higher the price at which an economic good (a commodity in demand) can be sold, the greater the volume of its sellers and manufacturers are willing to offer on the market. This is quite logical: the more money the seller earns for the goods he sold, the more he will be able to spend on satisfaction already. own desires, especially comfortable life he can achieve.

The connection between the supply of goods and the price level at which these goods can be sold is illustrated in Fig. 3-3.

Rice. 3-3. Relationship between the supply of goods and the price level

As we can see, the higher the price, the greater the volume of goods sellers are willing to offer to the market in exchange for buyers' money. In other words, each level of price in the market will correspond to its own value of the supply of goods from sellers (manufacturers).

The quantity supplied usually moves in the same direction as prices. And the whole set of possible supply values ​​at various levels price forms the supply of certain goods on the market.

As with demand, the relationship between "supply" and "supply" is easier to understand if each is the answer to a specific question. The answer to the store owner's question: "How many products will manufacturers be willing to offer me for sale per month at a price equal to Xp.?" - there will be information about the VALUE OF THE OFFER. If he puts the question in a different way: “How many goods will manufacturers be willing to offer me per month at different price levels for this product?”, Then the answer will be the characteristic of SUPPLY in this market.

Since the quantity supplied changes depending on the change in the value of the price, then we can talk about the elasticity of supply with respect to price.

Offer- the dependence of the value of supply on the market of a certain product during a certain period (month, year) on the price level at which this product can be sold.

Price elasticity of supply- the scale of change in the supply value (in%) when the price changes by one percent.

The degree of such elasticity is determined by dividing the difference (in %) in the quantities supplied before and after the price change by the amount of price change (in %). Supply elasticity levels also differ across commodities, and therefore price changes of the same relative magnitude can cause unequal increases in the supply of different commodities.

Table 3-2

Information about possible supply quantities is usually presented graphically in the form of a curve, which is called the supply curve. It describes the picture of supply in a given product market, that is, the relationship between:

• product price and
• volumes of its production (deliveries to trade), possible at different price levels.

Let's build a supply curve (Fig. 3-4) based on the data in Table 3-2 (this kind of table is commonly called supply scales).

Rice. 3-4. The supply curve (on the example of the bicycle market)
Each point on this curve is the amount of supply of a given good (possible volume of production) at a certain level of its price. For example, a point with coordinates (70, 1300) means that at a price of 1300 den. units manufacturers are ready to offer 70 bicycles for sale

Thus, the supply curve (see Figure 3-4) allows us to answer two questions:

1. What will be the quantity supplied at different price levels?
2. How will the quantity supplied change if the price changes?

Therefore, any manufacturer (seller), embarking on a business, must begin by looking for answers to the following questions:

1. Will the sales proceeds justify the costs associated with the production (organization of sales) of this product?
2. Will the production (sale) of this product bring income to him personally, and if so, how much?

As a rule, an increase in prices causes an increase in the number of goods offered for sale, and a decrease in prices - a decrease in this number.

Economists call this pattern of behavior of producers (sellers) in the markets of most goods the law of supply.

Law of supply: an increase in prices usually leads to an increase in the quantity supplied, and a decrease in prices - to its decrease.

Along with the price, the supply of goods is also influenced by factors such as:

• the prices of other goods (and hence the profitability of their production);
• the prices of the factors of production used to manufacture the given commodity;
• technology, i.e., methods of manufacturing a product or organizing the provision of a service.

It is easy to see that the logic of behavior on the market for both buyers and producers of goods is opposite: with an increase in prices, producers and sellers are ready to offer an increasing mass of goods to the market, while buyers respond to an increase in prices by reducing the quantity demanded.

This opposition in the response of supply and demand is generated by the opposing interests that bring buyers and sellers into the market.

Buyers want to buy with the limited amount of money they have as much as possible. more items. Sellers, on the contrary, want to get as much money as possible for their limited amount of goods.

How the market reconciles these conflicting interests of sellers and buyers, we will learn in the next chapter.

But first, let's formulate another recipe for economic prudence.

Recipe three

It is necessary to remove obstacles to the free formation of supply and demand in the markets under the influence of the interests of all buyers and sellers.