Study questions.
The concept of a proposal. Individual offer and the factors that form it. Characteristics of the offer: the amount of the offer, the price of the offer. The function of the offer and the ways of its representation: the scale of the offer, the graph, the analytical dependence. The supply curve as a graphical supply model. The law of supply. The impact of price changes on the volume of an individual offer. A shift in the supply curve. Non-price determinants that determine the shift in the supply curve (factory prices, technology, taxes and subsidies, the number of sellers, profit expectations).
Firm's individual offer and market offer. Plotting a market supply curve from individual supply curves.
https://pandia.ru/text/78/293/images/image003_132.gif" alt="(!LANG:Signature:" align="left" width="753 height=86" height="86">В !} this definition neither a qualitative nor a quantitative assessment of the mentioned dependence is given. Only the need for producers to have a desire to sell some good on the market and readiness to do so is emphasized. You can specify the quantitative side of the dependence under consideration if you ask manufacturers one of the following questions:
Ø “What is the maximum amount of the good you are willing to sell at a given price?”
Ø “At what minimum price are you willing to sell a given quantity of a good?”
As answers to these questions, we will get what in economic theory is called the supply quantity and the offer price, respectively.
If we assume that such questions are asked about all possible values of prices or volumes, and the answers are plotted in the appropriate coordinates (Q - quantity, P - price), then the curve. connecting the obtained points is called the supply curve.
Mathematically, the supply law can be expressed by the supply function.
OFFER FUNCTION
The dependence of supply on the factors that determine it is called offer function .
The offer function can be represented as follows:
QSA =F(PA, PB, L, T, N,…)
where QSA- volume of supply of good A in a certain period of time
RA- the price of good A,
Rv...PZ- prices of other goods,
L- a value that characterizes technical progress,
T- value characterizing taxes and subsidies /
N- a value characterizing the natural and climatic conditions,
... - other factors influencing the offer.
If we imagine that all the factors that determine the supply of a product, except for the price of the product itself, do not change, then the supply function will take the form of a function of the supply of a product from its price.
QSA =Q(PA)
The supply function of the price, as well as the demand function of the price, can be represented in the following ways.
Tabular way ( by using offer scale).
Analytical method
If there is a one-to-one correspondence between the price and the supply quantity Qs, then there is both a direct and an inverse supply function.
If there is a linear relationship between QS and P, then the price offer formula will look like QS = a + bP., where b>0.
For example, the mathematical formula of the function describing the dependence of QS and P given in the sentence scale is:
QS = 3P-2, where (QS is the supply volume of the product; P is the price of this product.
If the offer function is set in the form of a graph, then one speaks of a graphical method for setting the offer function.
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Fig.1. Supply Curve Examples
The supply schedule can be obtained using the supply scale data or by plotting the function of supply against price.
In this case (Fig. 2), the supply line demonstrates that at a price P = 6 monetary units, the volume of supply of goods: will be QS = 16 thousand units per month; this state of the market corresponds to point A of line S.
If the price in the market falls to P=3 monetary units, the volume of supply will be reduced to QS = 7 thousand units per month. This market situation is reflected by point B on the supply line.
When studying this topic, it is very important not to confuse such concepts as " sentence" and " supply value» . The offer reflects the volume of planned sales at all possible levels of the price of a product or service, that is, it graphically represents the entire graph of the supply curve. The quantity supplied is the amount of a good that sellers are willing to sell at a particular price level and represents one point on the supply curve graph.
An increase in supply means that, at each price level, producers are willing to sell more of the good than before. When supply increases, the supply curve shifts to the right - down.
A decrease in supply means that, at each price level, producers are willing to sell less of the good than before. When supply decreases, the supply curve shifts to the left - up.
Knowing the equation or graph of the supply curve, one can determine the quantity supplied at any price. In this way:
Ø proposal change- this is a shift of the entire supply curve, that is, a change in the magnitude of supply for all possible values of the price of an economic good;
Ø change in supply is the shift along the supply curve associated with a change in the price of an economic good.
When the price of a commodity decreases, producers will tend to offer less of it for sale. With an increase in the price of a commodity, the consequences are directly opposite (Fig. 2).
Fig. 3 Consequences of changing the price of an economic good
Let us now consider non-price supply factors, that is, parameters that affect the planned sales volume of producers and cause a shift in the supply curve.
Non-price supply factors:
Resource prices;
Technology;
Subsidies;
Number of manufacturers;
Producer expectations;
Other factors.
Resource prices
The producer, in order to produce any product, must use economic resources. As we already know, the supply reflects the minimum price for which the manufacturer is willing to put a given volume of goods on the market. A change in the price of economic resources, ceteris paribus, will lead to the fact that the cost of production this product will increase.
Consequently, at a given price level, the producer will not receive the expected profit or will not cover the costs of its production at all. Thus, when resource prices rise, the producer will either have to increase the supply price at each of the levels of the quantity of goods, or reduce the supply at each of the possible price levels. In any case, the arrangement of this product on the market is reduced and the supply curve shifts to the left - up. Falling resource prices have the opposite effect.
Increasing resource prices Decreasing resource prices
Rice. 4. Consequences of changes in resource prices
Technology
Technology can be understood as a certain way of organizing the process of using economic resources to obtain a certain product or service. Thus, the improvement of technology can be considered the creation of a new method of production, which will make it possible, with the same amounts of resources, to produce a larger volume of products or, accordingly, the ability to produce the same volume of products with fewer resources. In this case, the manufacturer, of course, will be able to offer a larger volume of goods to the market at any of the possible price levels. Thus, with the improvement of the technology of production of goods, the supply of goods increases, and the graph of the supply curve shifts to the right - down.
Rice. 5. Consequences of changing technology
It may seem that in modern world, in a constant scientific and technological progress situations of deterioration of technologies are impossible. This is not true. There are quite simple examples:
Ø natural disaster seriously damages power lines and power plants themselves, thereby forcing a significant part of industries to return to the use of manual labor instead of machine tools;
Ø One company initiates and wins a lawsuit against another, accusing it of illegally using patented modern technologies, which leads the guilty company to return to obsolete technologies before purchasing a license or developing their own solutions.
With the deterioration of the technology of production of goods, the supply of goods decreases.
Producer taxes
The price a producer receives for a product is his income. Taxes reduce the amount of this income of the producer, since he is now obliged to give some part of the price of the goods to the state. Thus, the imposition of a tax is tantamount for the producer to the fact that he will have to receive a lower price for each unit of goods sold. The introduction or increase of a tax leads to a decrease in the supply of goods. Reducing or eliminating the tax leads to an increase in the supply of goods.
Rice. 6 Consequences of changing the effect of taxes
Subsidies (transfers) to producers
Transfers increase the income of the producer, since now the state pays him some amount for each unit of goods. Thus, the introduction or increase of a transfer leads to an increase in the supply of goods, and a decrease or cancellation - to a decrease in the supply of goods.
Rice. 7. Consequences of changing the effect of transfers
Number of manufacturers
Obviously, twenty firms are able to offer more products to the market than one at the same price level. Thus, the greater the number of producers, the higher the market supply (with a decrease in the number of producers, the supply of goods is reduced).
Rice. 8. Consequences of changing the number of producers
Manufacturers' expectations
Producers' expectations about future changes in the markets affect their supply of goods at the present time. If, for example, a communication store expects that the price of mobile phones of a given model will increase in the future, how will it change their offer at the current time? Most likely, the seller will prefer to sell more goods in the future, getting a higher price for it. Thus, the supply of this product today will decrease.
Rice. 9. Consequences of expecting a change in the price of a commodity in the future
If the manufacturer assumes that a new, improved model will be released soon mobile phone, then, most likely, the supply of the old model will increase at the moment, of course, you have come across such a phenomenon as seasonal sales, when firms are actively trying to sell, albeit at reduced prices, the remnants of old batches of products. Thus, different expectations of producers have a different impact on the supply /
D other factors
There are many other reasons that influence supply. This may be a change in the management of the company, the discovery of new mineral deposits, weather conditions, political events, etc. It is impossible to list and consider the influence of all possible factors in a change in supply, but we will try to summarize everything that we have learned about supply factors.
MARKET SUPPLY CURVE.
The number of producers has a positive effect on the market supply. By increasing the number of producers in the market, more economic good can be offered at each price level. In accordance with this statement, the addition of individual individual supply curves is carried out to obtain a general market supply curve: at each possible price level, it is necessary to add the values of individual offers of individual producers. It is the magnitudes of individual sentences that are subject to addition, that is, the curved sentences "add up horizontally."
In order to add supply curves, you can use the following scheme:
1. Determine the minimum price value at which there is at least one seller on the market.
2. We note how much goods are offered on the market at a given price.
3. We determine at what price the next seller (or sellers) will join the sellers who operated on the market at the price of point 1.
4. We note how much goods are offered on the market by all sellers at a given price.
5. Repeat steps 3 and 4 until all sellers have entered the market.
Example 1
Consider an example of adding two supply curves when producers are ready to start offering goods at the same minimum price Pmin. The offer of the first producer is shown in fig. At some current price level P2 > Pmin, there are two producers on the market who are ready to offer, respectively, the volume of goods equal to: 
.
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Fig.10. Individual and total supply curve
Example 2
Consider an example of adding two supply curves when producers are ready to enter the market at different minimum prices: Pmin1 and Pmin2. The proposal of the first manufacturer is shown in fig. 11 line S1, the proposal of the second manufacturer - line S2.
Under these conditions, the minimum price at which at least one producer is ready to offer a product on the market is the price of the first producer Рmin1 (since Рmin1< Рмин2). Следовательно, минимальная цена на суммарной кривой предложения - Рмин1.
The second producer begins to offer the product on the market when the price of the product rises to the level of Pmin2. At the same time, it is necessary to calculate how much volume is already offered on the market at a price equal to Pmin2. The second producer at this price only enters the market, that is, the volume of his supply is zero. However, the first producer at a price equal to Pmin2 offers a certain volume of goods, in order to calculate how much he offers, it is necessary to substitute the value of the price Pmin2 into the equation of the supply curve of the first producer.
Assume that at a given price, the first producer offers a volume of goods equal to Q1 at Pmin2. At a certain price Р2>Рmin2, both manufacturers are active in the market, ready to offer, respectively, the volume of goods equal to: Q2+Q3=Qryn.
Rice. 11 Individual and total market supply curves
The equation of the total market supply curve can be derived analytically from the equations of the individual supply curves. To do this, you can use the following scheme:
1. Write down the equations of individual supply curves as functions: Q = Q(P).
2. Add the right parts of the obtained equations in accordance with the domains of definition.
3. Write analytically the market supply curve.
Commodity producers proceed from the needs of people and produce goods and services sold on the market. Consequently, the totality of commodity producers provides people with the satisfaction of their effective demand, i.e., forms an offer. Sentence- the desire and ability of producers (sellers) to provide goods for sale on the market at every possible price in every this moment time. The ability to provide goods is associated with the use of limited resources, so this ability is not so great as to satisfy all the needs of all people, because the total needs, as you know, are unlimited.
The volume of supply depends on the volume of production, but these two quantities do not always coincide. The size of the supply is not identical to the volume of manufactured products, since usually a part of the manufactured products is consumed within the enterprise (domestic consumption) and is not provided to the market. On the other hand, there are various losses during the transportation and storage of goods (for example, natural loss).
The quantity of goods that the company wants to produce is influenced by many factors, the main of which are the following: the price of the goods itself; the price of resources used in the production of this good; technology level; company goals; the amount of taxes and subsidies; manufacturers' expectations. Thus, the supply is a function of many variables, but we are primarily interested in the nature of the relationship between the supply and the price of the goods, while other factors that can affect the supply remain unchanged.
There is a positive (direct) relationship between the price and the quantity of the goods offered: ceteris paribus, with an increase in the price, the supply also increases, and vice versa, a decrease in the price is accompanied, other things being equal, by a decrease in the volume of supply. This specific connection is called the law of supply.
The operation of the law of supply can be illustrated using a supply schedule.
A graphical expression of the relationship between the price of a good and the quantity of that good that producers want to supply to the market. The supply curve is ascending due to the law of supply.
Just as in the case of demand, a distinction is made between individual and market supply. Individual offer- Proposal of an individual manufacturer. market supply- a set of individual offers of this product. The market supply is found purely arithmetically, as the sum of the offers of a given product by different producers at each possible price. The market supply schedule is determined by horizontally summing the individual supply schedules.
Non-price supply factors.
The supply curve is constructed on the assumption that all factors, except for the market price, remain unchanged. It has already been indicated above that, in addition to price, many other factors influence the volume of supply. They are called non-price. Under the influence of a change in one of them, the quantity supplied changes at each price. In this case, we say that there is a change in the proposal. This is manifested in the shifting of the supply curve to the right or to the left.
When the supply expands, then the curve S 0 shifts to the right and occupies position S 1, in the case of contraction of supply, 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 has to 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 the goods offered at each price, and the supply increases.
2. Level of technology. Any technological improvement, as a rule, leads to a reduction in resource costs (lower production costs) and is therefore accompanied by an expansion in the supply of goods.
3. Goals of the firm. The main goal of any firm is profit maximization. However, often firms may pursue other goals, which affects the supply. For example, a firm's desire to produce a product without pollution environment can lead to a decrease in the quantity offered at each possible price.
4. Taxes and subsidies. Taxes affect the expenses of entrepreneurs. An increase in taxes means an increase in production costs for the firm, 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 an increase in business subsidies certainly stimulates the expansion of production, and the supply curve shifts to the right.
5. The prices of 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. Expectations of producers. So, manufacturers' expectations possible increase prices (inflationary expectations) have an ambiguous effect on the supply of goods. The offer is closely connected with investments, and the latter sensitively and, most importantly, unpredictably react to market conditions. However, in a mature market economy, the expected rise in prices for many goods causes a revival in supply. Inflation during a crisis usually causes a decrease in production and a reduction in supply.
7. Number of producers (degree of monopolization of the market). The more firms producing a given product, the higher the supply of this product in the market. And vice versa.
Just as in the case of the impact on demand of price and non-price factors, a change in supply and a change in the magnitude of supply are separated:
A change in non-price factors leads to a shift in the supply schedule itself to the right or to the left, since in this case, producers offer the market a different (more or less) quantity of this product at each price. Such changes in supply can only occur if non-price determinants of supply change. Here we are talking about proposal change;
Whenever, as a result of some changes in the market situation, the quantity supplied changes, and all factors affecting it, except for the price of good X, remain unchanged, the supply curve for the good remains in the same place, there is a movement along the supply curve. In such cases, ceteris paribus, the quantity of commodity X offered by producers for sale changes. Here we are talking about change in supply.
In previous questions, it was said that costs are the main factor influencing the volume of supply.
Therefore, before deciding how much to produce, a firm must analyze costs.
Costs is the payment for the acquired factors of production.
This indisputable truth is considered by different economists from different positions and with different goals.
K. Marx linked the study of costs with the desire to explore the features of the exploitation of wage labor, which are reflected in the cost, and therefore in the costs.
To produce a commodity, Marx believed, society must spend both living labor (necessary and surplus) and materialized labor, expressed in the cost of equipment, raw materials, fuel, etc.
These labor costs form the value of the commodity, which he called society's costs.
With cash receipts after the sale of goods, the capitalist covers the costs of equipment, raw materials, fuel, energy and pays for the necessary labor. He does not pay for surplus labor.
This means that the costs incurred by the capitalist, i.e. his production costs, less than the cost of society (the value of the commodity) by the amount of unpaid surplus labor.
It is he who is the source of profit. Therefore, Marx profit is beyond costs.
In addition to production costs, Marx singled out distribution costs, those. costs associated with the process of selling goods.
Not all distribution costs take part in the formation of the value of a commodity, but only that part of them that is productive, i.e. represents a continuation of the production process in the sphere of circulation (transportation, storage, packaging, etc.).
Consequently, for Marx, not all costs are price-forming.
Unlike K. Marx, modern Western economists consider costs from the point of view of a business executive.
They believe that the entrepreneur expects income from all costs without exception. On this basis, they include the profit of the entrepreneur in the costs, evaluating it as a payment for risk.
In their theory, the costs of production, including the normal average profit, are called economic or opportunity costs.
Unlike Western economists, Marx believed that the sum of production costs (C + V) together with profit (P) forms the price of production.
In foreign literature there is a complex classification of costs.
Depending on the impact on them of an increase in production, costs are divided into constants and variables.
fixed costs FC (Fixed cost) These are costs that do not depend on the volume of production.
These include deductions for depreciation of buildings and structures, rental payments, administrative and management expenses, etc. These costs must be paid even if the business is shut down.
variable costs VC (variable cost) - These are costs that depend on the quantity of products produced. They consist of the cost of raw materials, materials, wages etc. As output increases, variable costs increase.
The division of costs into fixed and variable is conditional and depends on the period for which the analysis is carried out. So, for a long period, all costs are variable, because over a long period of time all equipment can be replaced (a new one is bought or an old plant is sold, etc.).
The sum of fixed and variable costs forms gross, or general, costs TS (total cost).
Gross, variable and fixed costs can be represented graphically.
To measure the cost of producing a unit, categories of average total ATS (average total cost), average constants AFC (average fixed cost) and average variable costs AVC (average variable cost).
Average cost important in determining the profitability of a firm. If the price is equal to the average cost, then the firm has a zero effect, there is no profit.
If the price is less than the average cost, then the firm incurs losses and may go bankrupt.
If the price is greater than the average cost, then the firm earns a profit equal to this difference.
The average total cost is equal to dividing the total cost by the quantity produced:
Average fixed costs are determined by dividing the total fixed costs by the quantity of goods produced:
Average variable costs can be obtained by dividing total variable costs by the quantity of goods produced:
Depending on the method of estimating costs, accounting and opportunity costs are distinguished.
Accounting costs- this is the actual consumption of factors of production for the manufacture of a certain amount of products at their purchase prices.
But the same resources can be used for various alternative purposes. Therefore, there are opportunity costs, or opportunity costs. For example, by organizing the production of refrigerators, the entrepreneur misses the opportunity to produce cars and receive the benefits associated with this.
Opportunity cost - it is the amount of money that can be obtained with the most profitable of all possible alternative uses of resources.
From the point of view of the receipt of funds, the costs are divided into external and internal (explicit and implicit).
External costs- this is the company's cash costs for the purchase of raw materials, equipment, transport, energy "from outside", i.e. from suppliers outside the company.
Internal costs- these are unpaid costs for own and independently used resource.
For example, a company uses part of the grown grain crop for sowing its land areas. The company uses such grain for its internal needs and does not pay for it.
In order to determine the maximum output that a firm can produce, marginal cost is calculated.
marginal cost MS (marginal cost) - is the incremental cost of producing each additional unit of output over a given output:
They are important in determining the firm's strategy. Since fixed costs are unchanged, marginal costs are equal to the increase in variable costs (costs of raw materials, labor force etc.).
Economics is the science of all processes in economic activity studying market laws and features. The most important concepts in it are supply and demand, the understanding of which gives an idea of the whole of economic activity. Let's consider the second one.
In contact with
Basic concepts
It is difficult to describe the offer in economics with one exact word, since this concept is composite.
It can be described as manufacturer's behavior and his ability and willingness to provide any quantity of his goods.
This takes into account the length of time for which the goods will be produced, and other conditions.
Exist non-price factors affecting it:
- technology level;
- cost expression of raw materials;
- the amount of tax payments;
- the number of manufacturers;
- producer expectations;
- availability of competitive products.
Types of supply in the economy may be in the form:
- raw materials or resources;
- industrial products;
- wage labor;
- capital;
- consumer things (long-term and short-term use);
- services.
It is important in the analysis to distinguish the size of the goods offered.
A change in value is the reaction of producers to a change in price under unchanged external conditions, and an increase in supply is a reaction to a change in factors that are not related to price formation.
These processes are shown by elasticity - a parameter that gives an understanding of the change in the value of a good and the volume of this good on sale.
The amount of supply is in the economy volumes of product sold presented for sale, taking into account the time period. It changes from price changes or some non-price circumstances. Factors affecting it:
- Cost of resources - they determine the cost of production.
- Technology - modern technologies reduce the cost of production and reduce costs, respectively, more things can be produced.
- Taxes and subsidies - the more taxes a producer pays, the higher the cost of his products and the less he will produce. But subsidies from the state can increase the amount of products produced.
- Value expression of other products - increase or decrease in value related products maybe influence the release of other products.
- Expectations - By trying to anticipate price increases or decreases, manufacturers control the number of items on the market, thereby creating scarcity and accelerating price increases.
- Competition – the more/fewer similar products on the market, the more/fewer products offered.
- Time – the more time manufacturers have, the sooner they can respond to price changes.
The value depends and from market periods:
- instant - producers cannot respond to market changes, and their capacities remain the same;
- short-term - production can use capacities more or less intensively;
- long-term - firms have time to respond to changes in time and adapt their resources to new market conditions.
You should also know such a thing as the volume of supply - this is the amount of product that offered to buyers at a specific price.
The law of supply in economics
What is the so-called supply-side economics theory? This is a theory that states that economic growth can be stimulated by lowering barriers to the production of products.
This means a reduction in the number of taxes and prohibitions that the state creates when regulating the market.
If stick this theory in practice, the consumer will receive more products for less money.
The development of this theory began in the 1970s, when Western countries built their processes on Keynes's theory and this led to a general serious decline. These years were marked by a serious crisis, stagflation and increased competition among third world countries.
Important! by the most a prime example The crisis of those years became the oil crisis in 1975.
In response to these developments, the school of economics in Austria provided a new framework derived from the teachings of past scholars: Ibn Khaldun, Swift, Hume, Smith. main idea theories is the idea that the key to prosperity lies in the production of products, and demand is a secondary phenomenon. Say's law defines this well: a product is created when it can be exchanged for other products whose value will be equivalent. The main question of different theories is supply and demand, which of them is primary and more important? The new economic theory is very similar to the theory, and prominent economists of our time call it the second most important theory of economics.
In the early 1980s, economists formulated the main theses of this theory and the principles of its work. They indicated that a more efficient system of taxation and reduce the influence of the state on production and economic growth. The theory adopted in the 1980s has now ensured a gradual leveling of the market and ensured economic growth.
Market dependencies
Most often, economists represent the situation in the market graphically, where the supply is called a curve. At the same time, the curve describes the picture in a particular market, i.e. the relationship between two product characteristics:
- price;
- volume.
At the same time, another important quantity is also depicted on the curve - this is demand - a concept that reflects people's desire to buy in a certain amount of certain things at a specific cost. Demand happens:
- Exogenous - a change in demand occurs on the basis of the intervention of the state or any other external forces.
- Endogenous - is formed strictly within society due to the factors and circumstances that exist in it.
At the same time, demand is also affected by cost and non-price factors, which include:
- specific income;
- market size;
- seasonality;
- changes in the environment;
- product availability;
- usefulness of a thing;
- population;
- competition;
- inflation and its expectation.
However, this relationship does not concern the distribution of resources. Their laws and graphs perfectly demonstrate this:
Law of demand: all other factors being equal, an increase in the goods offered for sale and in the payment for the goods provides drop in buyers' interest.
It can be put simply: the more expensive the product, the less people will buy it, since the purchase ceases to be attractive to the client.
The law of supply states that the greater the price for a product, the greater the volume of goods offered. Manufacturers provide more products at a higher cost because their sales will generate more profit. An increase in supply provokes less demand.
The law of equilibrium price is the point at the intersection with the most profitable and efficient distribution of goods. In this case, there will be the same amount of produced and consumed, i.e. supply and demand are equal.
Any country should strive to achieve an equilibrium price position so that the work of production is most efficient, and the consumer does not experience discomfort from a lack of products.
Important! The most ideal position in the market is the equilibrium price position.
Imbalance
It is rather difficult to achieve a position of equilibrium under conditions, but other situations are much more common. Any economic situation in the market where there is no equilibrium in value is called an imbalance. In this situation, there is only two options:
The first is excess supply in the economy, the following conditions are true for it:
- payment for a certain amount of supply = B1;
- plants and factories wish to sell their products with value = A2;
- customers wishing to purchase products at a price of B1 = A1, which is much less than the previously established A2;
- since A2>A1, then there is too much production and its quantity is greater than the need of buyers.
Manufacturers are engaged in the creation of large batches of products and hope to sell everything and make a big profit.
However, there are much fewer people who want to buy, since the price set for things is not attractive.
Factories and factories will remain in the red, as far fewer people will buy their products than they expected.
Excess demand occurs when cost is much less than the equilibrium. For such a situation, the following conditions are true:
- production cost = P1;
- volume of goods that can be purchased = Q2;
- the number of products produced by firms = Q1.
- since Q2
There are too few products on the market, and it cannot satisfy all the needs of customers. Competition among buyers is formed, and the price of goods will increase, because demand for products is growing. Suppliers will raise prices, seeing a large demand, and the situation in the market will approach the position of the equilibrium price.
What determines the quantity of goods offered? Based on the data presented above, we can confidently say that, first of all, it depends on the demand for these goods.
We study the basics of economics - what is a proposal
The laws of supply and demand in economics
Conclusion
Thus, we can say that supply and demand in the economy are interrelated quantities, and from an increase in one, the second grows, and vice versa. Understanding the principle of the formation of these concepts, you can understand the principle of the market, as well as any production. This topic is considered one of the most important of all lessons and lectures in economics.
Offer - the ability and desire of the seller (manufacturer) to offer their goods for sale on the market at certain prices. Such a definition describes the proposal and reflects its essence from a qualitative point of view. In quantitative terms, the supply is characterized by its size and volume. The volume, value of supply is the quantity of a product (goods, services) that the seller (manufacturer) wants, can and is able to offer for sale on the market for a certain period of time at a certain price in accordance with the availability or productive capabilities.
There is a direct relationship between the price and the quantity of the product offered, that is, the higher the price of the product, the greater its quantity (ceteris paribus) will be produced and offered for sale, and vice versa. This is the law of supply. Its graphic representation is the supply curve S (from the English supply - offer).
The entire supply curve characterizes supply. The movement along the supply curve from A to B is associated with a change in the quantity supplied.
Supply is the quantity of a good that sellers are willing and able to sell on the market at given prices.
A shift of the S curve to the right or to the left means that the supply has changed (increased or decreased) under the influence of non-price factors.
Non-price factors influencing supply:
– taxes,
- prices for resources,
- technology,
– customs tariffs.
Factors affecting the offer:
1. Availability of substitute products.
2. Availability of complementary goods (complementary).
3. The level of technology.
4. Volume and availability of resources.
5. Taxes and subsidies.
6. Natural conditions
7. Expectations (inflationary, socio-political)
8. Market size
Ticket number 13.
Law of diminishing marginal productivity
The Essence of the Law
With an increase in the use of factors, the total volume of production increases. However, if a number of factors are fully involved and only one variable factor increases against their background, then sooner or later there comes a moment when, despite the increase in the variable factor, the total volume of production not only does not grow, but even decreases.
The law says: an increase in a variable factor with fixed values of the others and the invariance of technology ultimately leads to a decrease in its productivity.
Operation of the law
The law of diminishing marginal productivity, like other laws, operates in the form of a general trend and manifests itself only when the technology used is unchanged and in a short period of time.
In order to illustrate the operation of the law of diminishing marginal productivity, one should introduce the concepts:
common product
production of a product with the help of a number of factors, one of which is variable, and the rest are constant;
average product
the result of dividing the total product by the value of the variable factor;
marginal product
increment of the total product due to the increment of the variable factor.
Scale effect is associated with a change in the cost of a unit of output, depending on the scale of its production by the firm. considered in the long term. Reducing the cost per unit of output with the consolidation of production is called economies of scale. The type of the long-run cost curve is associated with the effect of scale in production.
Answer to question 14: Elasticity, its types and types. The practical value of the elasticity index.
Elasticity - the degree of response of one variable in response to a change in another associated with the first value.
The concept of "elasticity" was introduced into economic literature by A. Marshall (Great Britain), his ideas were developed by J. Hicks (Great Britain), P. Samuelson (USA) and others.
The ability of one economic variable to respond to a change in another can be illustrated in various ways, based on the chosen units of measurement. In order to unify the choice of units of measurement, the method of measurement in percent is used.
A quantitative measure of elasticity can be expressed in terms of the coefficient of elasticity.
The elasticity coefficient is a numerical indicator showing the percentage change in one variable as a result of a one percent change in another variable. Elasticity can vary from zero to infinity.
Types of elasticity. There are the following types of elasticity:
- price elasticity of demand;
- income elasticity of demand;
- price elasticity of supply;
- cross price elasticity of demand;
- point elasticity of demand;
- arc elasticity of demand;
- elasticity of the ratio of prices and wages;
- elasticity of technical substitution;
- elasticity of a straight line.
Answer to question 15: Market equilibrium, its conditions. Causes of market disruption
MARKET EQUILIBRIUM - a situation in the market in which there is no tendency to change the market price or the volume of goods sold.
Market equilibrium is established when the price is brought to a level that equalizes the quantity demanded and the quantity supplied. The market equilibrium of price and the quantity of goods sold can change in response to changes in supply and demand.
When the "price ceiling" is set below the equilibrium price, there is a shortage (sometimes called an excess demand for goods) and the quantity demanded exceeds the quantity supplied. This situation will lead to competition between buyers for the opportunity to buy this good. Competing buyers begin to offer higher prices. In response, sellers begin to raise prices. As prices rise, demand decreases and supply increases. This continues until the price reaches its equilibrium level.
When price floors are set above the equilibrium price, supply exceeds demand and there is a surplus of goods. Market equilibrium and deviation from it are shown in fig. 4.2.
Rice. 4.2. Market equilibrium
There are four variants of the influence of shifts in supply and demand curves on the price and volume of goods.
- An increase in demand for a good causes a shift in the demand curve to the right, resulting in an increase in both the equilibrium price and the equilibrium quantity of the good.
- A decrease in demand for a good shifts the demand curve to the left, resulting in a decrease in the equilibrium price and equilibrium quantity of the good.
- An increase in the supply of a good shifts the supply curve to the right, resulting in a decrease in the equilibrium price and an increase in the equilibrium quantity of the good.
- A decrease in the supply of a good shifts the supply curve to the left, resulting in an increase in the equilibrium price and a decrease in the equilibrium quantity of the good.
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