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Demand and its characteristics.

Each independent farm that enters into relations with other independent farms creates supply and demands on the market. Let's start with demand analysis.

The desires of the individual in a market economy are transformed into the concept of demand. Naturally, demand cannot be identified with need as such: if a person is in need of some good, but he does not have money, then he does not have consumer demand. Therefore, demand is a solvent need.

Demand is influenced by a number of market factors: the prices of the requested goods, the income of buyers, their tastes and preferences, the number of buyers in the market, the prices of substitute goods and complementary goods. Moreover, the market usually appears before the consumer, where it is possible to choose an alternative quantity of goods of the same name that are in demand, at different prices. For the same money, a person buys more products if their price drops, and vice versa.

Demand function- this is the relationship between the desires of consumers to have a particular product (demand for the product) and the factors that determine it. General function demand can be represented as follows:

Qd = f (P, I, T, Ps, Pc, N, Ec),

Where Qd- volume of demand;

P- the price of the product;

I- income of consumers;

T- tastes and preferences of consumers;

PS- the price of interchangeable goods;

PC– the price of complementary goods;

N- the number of buyers of this product;

EU- consumer expectations.

Thus, the magnitude of demand is a function of a number of variables. First of all, it depends on the price. .Price is the amount a consumer is willing to pay for a given quantity of a good.

Suppose that all factors except the first one (the price of a given good) are unchanged. Then the quantity demanded will depend only on the price R:

Qd = f(P).

Let's look at this dependency simple example. Suppose that in some local market people buy different amount apples, if their price will decrease as shown in the demand scale (Table 2.1).

Demand Scale shows how many goods can be bought at different prices for a given period. Analysis of this scale makes it easier to identify the interdependence of price and demand.

Law of demand says: with other equal conditions the quantity demanded of goods varies inversely with price.

The higher the price of a good, the lower the demand for it from buyers, and, conversely, the lower the price of a good, the greater the demand.

Such a quantitative dependence is presented in the form of a graph (Fig. 2.1). Here is the same conditional example about selling apples for a month

Rice. 2.1. Demand curve

tons of market. Prices for apples are plotted on the y-axis R(from English. price - price). The abscissa shows the number of apples for which demand is presented. Q(from English quantity - quantity). Curve D(from English. demand - demand) on the graph shows that when the price rises, the solvent need of people decreases and the demand falls, and vice versa, when the price falls, the demand for products increases.

The configuration of the demand curve - its downward slope (negative slope to the x-axis) - can be explained in terms of two effects: the income effect and the substitution effect.

income effect shows how the real income of the consumer and his demand change when the prices of goods change. For example, if the price of apples fell from 20 rubles. up to 10 rubles, then the buyer with his permanent income will be able to buy not 2 kg, but 9 kg of apples. And if he no longer wants to buy this product, then he can use the “released” money to buy an additional amount of another product. A decrease in the price of a good made the consumer really richer and allowed for an increase in the volume of demand, which is the meaning of the income effect.

substitution effect demonstrates the relationship between the relative prices of goods and the quantity demanded by the consumer. A decrease in the price of apples, as in our example, with the same level of prices for other goods, means that they are relatively cheaper compared to, for example, pears, plums, etc. The consumer will begin to replace relatively more expensive pears with cheaper apples and will buy not 2, but 4, 6 or 9 kg.

The income effect and the substitution effect do not act in isolation, but interact with each other, and in different situations the stronger influence of one of them may prevail.

Each product has its own demand curve. However, one should not think that it is given once and for all. Under the influence of a number of factors, the demand curve for a product can shift. In this regard, it is important to distinguish between the magnitude (volume) of demand and the demand itself.

Demand quantity can change if only the price of a given product changes, and all other factors affecting demand remain unchanged, i.e. the principle of “ceteris paribus” applies. Graphically, the change in the magnitude of demand is depicted as a movement along the demand curve from one point to another. If there is a change in at least one of the factors contained in the demand function, other than price, which had previously remained unchanged (for example, the income of the consumer, his taste, the number of consumers, the prices of substitute goods or complementary goods), then demand itself will change. The factors that cause a change in demand are called non-price. Graphically, this situation is represented by a shift in the demand curve to the left up or to the right down. Consider the graphs in fig. 2.2.

For example, an increase in consumer income will lead to the fact that at the same price R 0 he will be able to buy more goods, which will move the point A 0 exactly A 1, which means an increase in the number of purchases with Q 1 to Q 2. Similarly, the demand curve will shift to the right from position D 0 in D 1 with an increase in the number of buyers in the market. The same will happen when tastes and preferences change (for example, in summer the amount of ice cream bought at a constant price increases). Obviously, if the values of the variables change in the opposite direction, the demand curve will shift to the left from the position D 0 V D 2.

However, it is also important to establish the scale of changes in the volumes of supply and demand when the price of a given product changes. Therefore, now we will find out why the curves D And S change in a certain way, and therefore why they intersect at one point or another. In order to address this issue, we need to consider new category- elasticity.

The price elasticity of demand is is the degree of sensitivity of changes in demand for a product to changes in its price. It shows how much percent demand will increase (decrease) when the price of a given product changes by one percent.

Mathematically, the elasticity of demand can be expressed as the following elasticity coefficient ( Ed):

Where Ed– price elasticity of demand;

D P/P- relative (percentage) price change;

D Q/Q- relative (percentage) change in demand.

Elastic demand occurs when the quantity demanded changes by a greater percentage than the price. For example, if the price of a car increases by 1%, sales decrease by 2%. In this case

Ed= –2 % / 1 % = ?–2? = 2.

The value of price elasticity of demand is always a negative number, because the numerator and denominator of a fraction always have different signs. Since economists are interested in the value of the elasticity coefficient, in order to avoid confusion in economic analysis the minus sign is omitted, i.e. the absolute value of the indicator is taken.

Inelastic demand occurs when the purchasing power of buyers is not sensitive to price changes. Let's say, no matter how the prices of bread, salt, and sugar rise or fall, the demand for these goods changes insignificantly.

We present options for the elasticity of demand :

1. elastic demand occurs when the quantity purchased increases by more than 1% for every percent reduction in price (strong reaction), i.e. Ed> 1. Typically, luxury goods, such as expensive cars, clothes of famous fashion designers, etc., have elastic demand. If the prices of these goods rise, buyers refrain from buying or switch to other similar goods.

2. Inelastic demand occurs when the purchased quantity of a good increases by less than 1% for every percent reduction in the price of that good (weak response), i.e. Ed < 1. Обычно неэластичный спрос существует на многие виды продуктов питания (хлеб, соль, сахар), на медикаменты, другие предметы первой необходимости.

3. Unit elasticity occurs when the purchased quantity of goods increases by 1% while the price also decreases by 1%, i.e. Ed = 1.

4. Perfectly elastic demand occurs when, at a constant price or very small changes in demand, the demand decreases or increases to the limit of purchasing power. In this case Ed=?. It happens on competitive market in inflationary conditions: with a negligible decrease in prices or with the expectation of their increase, the consumer tries to spend his money to protect it from depreciation by investing in wealth.

5. Perfectly inelastic demand takes place if any change in price does not entail any change in the quantity required of production, i.e. Ed= 0. This is possible, for example, when selling drugs that are vital for a certain group of patients (insulin for diabetics).

The configuration of demand curves with different elasticity is shown in fig. 2.3, 2.4.

Rice. 2.3. Types of elasticity of demand

Rice. 2.4. Absolutely elastic
and perfectly inelastic demand

Calculating coefficient Ed, one more problem must be solved: which of the two levels of price and quantity (initial or final) to use as a reference point. The fact is that the mathematical expressions for the elasticity index in these cases will be different.

To avoid uncertainty in the calculations, the average values of the price and quantity of products are usually used for the analyzed interval, i.e. half the sum of the initial and final values of the indicators. This formula is called formula central points:

where D is change;

P 0, P 1 - respectively, the initial and final price of the goods;

Q 0, Q 1 - respectively, the initial and final quantity of production.

The elasticity of demand is an extremely important indicator for sellers who want to understand the effects of price changes on their revenues. When the elasticity of demand for a product is greater than 1, then a small price reduction increases the cost of sales and total revenue. When the elasticity of demand is less than 1, then a small price reduction reduces the cost of selling this product and reduces total revenue. Conversely, raising the price makes sense when demand is inelastic, since in this case the cost of sales will increase. And with elastic demand, there is no point in raising the price, as sales will decrease. General rules the impact of price elasticity of demand on the income of the seller (revenue from the sale) are presented in Table. 2.2.

Table 2.2

Effect of elasticity of demand on revenue from the sale of goods

From the above, we formulate basic rules of elasticity of demand:

1. The more substitutes a product has, the more elastic the demand, since a change in the prices of substitute and replacement goods always makes it possible to make a choice in favor of cheaper ones.

2. The more urgent the need satisfied by the product, the lower the elasticity of demand for this product. Thus, the demand for bread is less elastic than the demand for laundry services.

3. The more specific gravity the cost of goods in consumer spending, the higher the elasticity of demand. For example, an increase in the price of toothpaste, which is purchased in relatively small quantities and costs little, will not cause a change in demand. At the same time, rising prices for basic foodstuffs, the costs of which are quite high in the budget of consumers, will lead to a sharp decrease in demand.

4. The more limited access to a product, the lower the elasticity of demand for this product. This is a scarcity situation. Therefore, monopoly firms are interested in creating a shortage of their product, as this makes it possible to raise the price.

5. The higher the degree of satisfaction of needs, the less elastic the demand. For example, if each family member has a car, then buying another one is possible only with a significant price reduction.

6. Demand becomes more elastic over time. This is explained by the fact that the consumer needs time to abandon his usual products and switch to a new one.

What is the practical meaning of the demand curve? Why should it be known, for example, to an entrepreneur? The fact is that this curve expresses the price demand . Ask price is the maximum price a consumer is willing to pay for a given product. The asking price is not the same market price, that is, the price of a particular purchase, which is also called the market equilibrium price. It is limited to the income of the buyer and remains fixed, since he cannot pay more for this product.

Definition of demand

Any entrepreneur, supplying a product to the market, first of all faces the problem of demand for this product. Suppose he intends to invest money in the production of leather bags. But for this, he first of all should establish whether there is a demand for bags and what is its value.

Demand is determined by the desire of consumers to purchase a product. But define demand in an economy based only on the desires of buyers is almost impossible and fraught with serious errors. It is safe to assume that almost all students want to have Reebok shoes, but the manufacturers of these sneakers will make a serious mistake if they focus only on the desires of students. It is clear to everyone that today this desire is far from feasible for all schoolchildren.

In addition to the desire to have sneakers, you must have the opportunity to buy them, and for this you need to have about $ 120 in your wallet. Those who do not have such an amount of money will not be able to fulfill their desire, and for this group of buyers, manufacturers of this goods should not be guided. Hence,

Demand should not be equated with the magnitude of demand. What determines the amount of demand?

First of all, the quantity demanded will be determined by the price level. Suppose we conducted a survey of a large group of potential buyers, as a result of which it was possible to identify the following relationship between the magnitude of demand and the price of a product, which is presented in Table. 3-1.

Table 3-1 shows that an increase in price is accompanied by a decrease in the quantity demanded. So, at a price of 10 r. per bow of a commodity, the quantity demanded will be equal to 50 pieces of the commodity. 1price increase to 15 p. will entail a decrease in the quantity demanded to 42 pieces, etc.

This dependence of the quantity demanded on the price level is called the scale of demand. Determining the magnitude of demand and its dependence on price, we have in mind a set time and place. If our study had been conducted in a different country, region, or time, perhaps each price level would have corresponded to a different quantity demanded. That's why,

The established relationship between the price and the quantity demanded can also be depicted in the form of a graph (see Fig. 3-1).

The DD curve obtained on the chart (from the English demand - demand) is called the demand curve. Each point of this curve reflects the dependence of the quantity demanded on the price level. The DD curve is constructed in accordance with the data given in Table. 3-1.

The demand curve can be viewed from two perspectives:

For any particular price, the quantity demanded indicates the maximum quantity of a good that buyers are willing and able to purchase;

For any given volume of demand, a maximum price is set at which sellers will be able to sell a given quantity of goods.

Law of demand

Any competitive market where goods are exchanged has its own market laws. They are feature the economic response of the parties to the ratio of the quantity of exchanged goods and their pricing policy. One of the most important laws that are involved in the process of commodity exchange and pricing is law of demand.

The law of demand is such a law, in which, with an increase in the price of a product, the quantity demanded decreases, and a decrease in prices leads to an increase in demand for this product. It can be said with certainty that the law of demand is the link with which the quantity of the purchased goods and its price are connected.

That is, the originality of this law lies in the inverse relationship that exists between the price and the quantity of the purchased goods. You have probably seen more than once how, with an increase in price, the number of goods purchased by the consumer immediately decreases, and vice versa - if the price of a product decreases, then the quantity of goods sold immediately increases, as consumers like to purchase goods in reserve.

Just as naturally, there is such a tendency, when the quantity of a commodity on the market increases, then it can be sold, provided that the price for it decreases. And, probably, you have noticed that if there is a shortage of goods familiar to the buyer, then the price for them instantly rises, but, as a result, demand.

But you can also observe another feature of the law of demand, in which the demand of buyers is decreasing. Such a decrease in purchases of a particular product is no longer due to a high price, but due to the saturation of the market with this product. As a rule, such a glut occurs because, due to the low price, the population has made many purchases of the same product and the moment has come when such purchases are reduced, although the price of it has remained low.

Now we can highlight such important features of the market that the law of demand dictates to us.

The first such feature can be called the inverse relationship that was established between the price and the quantity of goods that the consumer buys;

Second important feature The law of demand is such a pattern as a gradual decrease in demand for any commodity exchanged on the market.

Effects affecting the law of demand

As we already know that the demand for a product is not always the same, since different effects can have different effects on its value. These can include the following effects:

Firstly, this is the “herd effect” or when the moments of joining the majority work, according to the principle “probably come in handy”;
Secondly, this is the Veblen effect or it is also called the conspicuous consumption effect.
Thirdly, the snob effect also affects demand.

And now let's try to understand in more detail such effects that affect our choice and demand.

The effect of joining the majority

The pattern of this effect is that many people succumb to the herd mentality and buy the product that everyone buys. As a rule, it is dictated by fashion. Each person strives to be in trend, keep up with fashion trends, be on a par with others and maintain a common style.

snob effect

But unlike the previous one, the snob effect is that the consumer tries to stand out from the crowd and acquires such a special product that will be different from the majority. He will never buy what attracts the majority. In this example, we can also say that the choice of a snob buyer depends on the choice of other consumers, but with the only difference that such a dependence is inverse.

Veblen effect

The next is the Veblen effect. It got its name from an American economist and sociologist who developed his theory and published it in a book called The Theory of the Leisure Class. In his theory, Thorstein Veblen tried to explain such a concept as prestigious and ostentatious consumption. That is, in this case, a person acquires some thing not because it is vital for him, but for the purpose of prestige, in order to impress others and other consumers. With such an acquisition, a person wants to emphasize his belonging to a high status.

In this case, such a buyer is not so much interested in the characteristics and quality of this product as in the price that he is willing to pay. That is, in this case it is worth talking not about the real price of this product, but about the prestigious one. After all, the real price is the price that a person really paid for the product, and prestige.

Law of Demand Factors

It will not be a secret to anyone that the main factor on which demand depends is the price or the price factor.

But besides the price, there are also factors that relate to non-price factors. These factors are:

Patterns of the law of demand

To justify the reliability of the law of demand, several arguments can be proposed.

1. In the vast majority of cases, there is a so-called price barrier: if the price rises, then for some part of the people the product is inaccessible, and they will be forced to refuse to buy it; the higher the price, the more people will be for whom the price barrier will be insurmountable; sales, widely practiced in all countries, when in order to increase the volume of demand the price is sharply reduced, sometimes to the level of the cost of liquidating the goods, can serve as an example of lowering the price barrier.

2. An increase in the volume of demand with a decrease in price can be justified by the income effect arising from this. An income effect occurs when a reduction in the price of a good saves some of the buyer's income; the income itself in this case does not change absolutely, but the saving gives the buyer the opportunity to purchase an additional amount of goods for the amount of money saved. For example, if the price of bananas drops from 30 p. up to 20 rubles, the buyer instead of 2 kg of bananas for 60 rubles. will be able to buy 3 kg, although his income has not changed. It rose only relative to the falling price of bananas.

3. An increase in the volume of demand with a decrease in price is also explained by the substitution effect. This effect is related to the problem of choice. If one of two interchangeable goods becomes cheaper, then the buyer will give preference to the cheaper product and reduce purchases of the other, which has become more expensive relative to the first. So, if pears fell 1.5 times in price, and the price of apples did not change, many consumers will reduce their purchases of apples and purchase more pears.

4. An increase in the magnitude of demand with a decrease in price can also be explained by the principle of decreasing marginal (additional) utility of a product. Imagine that you are on a hot afternoon at the beach and you are thirsty. Entrepreneurial people will take advantage of this and offer you to buy a bottle of Fanta. The pleasure or utility you get from the first bottle you drink will be very great. The second will bring you less pleasure, i.e., its marginal utility will be less; but most of you will agree to buy the third bottle only if it is offered to you at a lower price, since its marginal utility will be very low, and for some it will even become negative.

The above arguments enable us to explain why the demand curve is directed downward from left to right, i.e., has a negative slope: a decrease in the price segment on the vertical axis is accompanied by an increase in the segment reflecting the magnitude of demand on the horizontal axis.

Are there exceptions to this rule?

Giffen effect

The English economist and statistician Robert Giffen (1837-1910) described a situation where an increase in price leads to an increase in the quantity demanded. This situation has been called the Giffen effect. He watched how poor working-class families increased their consumption of potatoes, despite the rise in price. The explanation boils down to the fact that potatoes occupied a large share of the cost of food in poor families. Other food they could afford infrequently. And if there was an increase in the price of potatoes, the poor family was forced to refuse to buy meat and other whole foods and spend all their small income for the purchase of goods such as potatoes. The demand curve in this case would have a positive slope.

Other factors affecting demand

Considering the effect of price on the magnitude of demand, we have simplified the situation compared to what happens in real life. We assumed that other factors that affect the magnitude of demand remain unchanged. However, in practice, changes in demand depend on a number of factors that are not related to changes in the price of a given product.

Let's return to our example and suppose that in the surveyed group potential buyers of this product, there was a change in the income of their families: wages increased. How will this affect the scale and demand curve?

Under the new conditions, the scale of demand is shown in Table 3-2.

Consideration of the scale of demand allows us to conclude that the pattern of interaction between the magnitude of demand and price has been preserved: an increase in price leads to a decrease in the volume of demand. But now each price value corresponds to a larger amount of demand. In conditions of general income growth, and at low, high, and average prices, more purchases will be made. How will this affect the chart?

Let's build a new demand curve D"D" next to the previous DD curve.

The graph shows that the demand curve has shifted to the right, indicating a change in demand. Now we must make a significant refinement of the two concepts - demand and magnitude of demand - and distinguish between them.

A change in the magnitude of demand is caused only by a change in the price of a given commodity and can be illustrated by movement along the points of the demand curve. For example, moving from point A to point B and C on the DD curve shows that a decrease in the price of a good leads to an increase in the quantity demanded.

The change in demand, its growth or decrease, will be reflected in the new position of the demand curve relative to the original one. An increase in demand, for example due to an increase in income, will shift the demand curve to the right, and a decrease in income will lead to a decrease in demand, in this case the demand curve will shift to the left.

What factors lead to a shift in the demand curve, i.e., cause an increase or decrease in demand?

1. The level of income of buyers. We have already analyzed the influence of this factor. Here we need to clarify that the growth of incomes of buyers affects the demand for different types of goods differently. Distinguish between "lower" and "normal" goods.

The "inferior" goods include those goods that are usually purchased by people with low incomes. These are less valuable goods, although their quality may be good. For example, “inferior” goods include cereals, bread, pasta, second-hand goods, shoe repair services, etc.

As household incomes rise, the demand for “lower” goods decreases, and the demand curve shifts to the left. People buy less bread, margarine, cereals, replacing them with fruits, vegetables, meat, butter, refuse to repair worn shoes, buying new ones, etc.

“Normal” goods are more valuable, more useful goods. Their consumption reflects high level the welfare of the people. If consumers' incomes rise, they increase their purchases of "normal" goods, such as meats, valuable fish, vegetables, fruits, sports equipment, travel agency services, etc. Demand for these increases, the demand curve shifts upward to the right.

2. Tastes and preferences of consumers. Consumer tastes and preferences change quite often. They depend on successful advertising campaign, explanatory work (for example, about the dangers of smoking), marketing activities associated with sales promotion, the emergence of new products, changes in fashion, the season of the year.

3. The demand for goods will change if the prices of other goods that are in any way related to this product change. In this regard, it is necessary to distinguish between interchangeable and complementary goods.

Interchangeable goods are a group of goods that satisfy similar needs. For example, various laundry detergents, certain types of soft drinks, etc. If the price of washing powders, the demand for soap will increase, as it will be relatively cheaper. Then the demand curve for soap will shift
to the right. If the price of Pepsi-Cola decreases, the demand for Fanta will decrease and the demand curve for Fanta will shift to the left.

Complementary goods are goods that cannot be consumed one without the other. Examples of complementary goods are cameras and film, tape recorders and cassettes, tennis rackets and tennis balls, and so on. If the price of tennis rackets increases, the demand for balls will fall. Then the demand curve for tennis balls will shift to the left.

4. Expectation of changes in income and prices. The demand for goods is related to the expected changes in income and prices. If a decision is made to increase wages in the coming month, before their incomes rise, people will start buying more goods. They will give up part of their savings, make delayed purchases, which will cause an increase in demand for goods.

The same effect is caused by the expectation of rising prices. In this case, people will try to stock up on goods for future use and spend money that is expected to depreciate in the near future. The demand for goods will increase, whether they are expensive or cheap.

5. Change in the number of buyers. Demand will rise if there is an increase in the number of buyers. So, if a tray with ice cream is brought to the school building, many schoolchildren, passing by, will want to buy this delicacy, since they will not have to run to the nearest supermarket during recess. In this case, the demand for ice cream will increase. More will be bought as its inexpensive varieties, as well as those that are more expensive.

An increase in the birth rate will cause an increase in demand for children's products.

Ivanov S.I., Sheremetova V.V., Sklyar M.A. and others / Ed. Ivanova S.I. Economics (profile level), grades 10-11, Vita-Press

Demand is the quantity of a product that buyers are willing and able to purchase certain period time at all possible prices for this product.

In the economy there is a so-called law of demand the essence of which can be expressed as follows: other things being equal, the demand for a product is the higher, the lower the price of this product, and vice versa, the higher the price, the lower the demand for the product. The law of demand is explained by the existence of the income effect and the substitution effect. The income effect is expressed in the fact that when the price of a good decreases, the consumer feels richer and wants to buy more of the good. The substitution effect is that when the price of a product decreases, the consumer seeks to replace other goods whose prices have not changed with this cheaper product.

The concept of "demand" reflects not only the desire, but also the ability to purchase a product, i.e., as a rule, it implies not just a need for a product, but effective demand for this product. If there is a need for a product, but there is no opportunity to purchase the product, then there is no demand (effective demand) for this product. For example, a certain consumer has a desire to buy a car for 1 million rubles, but he does not have such an amount. In this case, we have a desire, but we are not able to pay, so there is no demand for a car from this consumer.

The law of demand is limited in the following cases:

with rush demand caused by the expectation of buyers of price increases;
for some rare and expensive goods, the purchase of which remains a means of accumulation (gold, silver, precious stones, antiques, etc.);
when switching demand to newer and quality goods(for example, if demand shifts from typewriters to home computers, a decrease in the price of typewriters will not lead to an increase in demand for them).

The change in the quantity of a good that buyers are willing and able to purchase, depending on the change in the price of this good, is called change in demand. On fig. 4.1 graphically shows the relationship between the price of a vacuum cleaner and the amount demanded for it. A change in demand is a movement along the demand curve.

Rice. 4.1.

D (English) demand ) - demand; R (English) price ) – price; Q (English) Quantity ) - the value of demand

If the price of a vacuum cleaner falls from 30 to 20 thousand rubles, then the demand for it will increase from 200 to 400 pieces. daily and vice versa.

However, price is not the only factor influencing the desire and willingness of consumers to purchase a product. Changes caused by the influence of all factors other than price are called change in demand. All these and other factors (the so-called non-price ones) influence both upward and downward demand.

Changes to non-price factors include:

in the income of the population. If incomes of the population grow, then buyers have a desire to purchase more items regardless of their prices. For example, there is a growing demand for high-quality clothing and footwear, durable goods, real estate, etc.;
in the structure of the population. For example, an increase in the birth rate leads to an increase in demand for children's products; the aging of the population entails an increase in demand for medicines, care items for the elderly;
prices for other goods. For example, an increase in prices for beef can lead to an increase in demand for a substitute product - poultry meat, etc.;
consumer tastes, fashion, habits, etc. and other factors not related to price;
in customer expectations. Thus, if they expect that the price of goods will soon decrease, then in this moment they can reduce their demand.

On fig. 4.2 the influence of non-price factors on demand can be depicted as a shift in the demand curve to the right (increase in demand) or to the left (decrease in demand).

Rice. 4.2.

D, D1, D2 - surveys, respectively, initial, increased, decreased

What is an offer?

Offer - This is the quantity of a good that sellers are willing and able to offer in a given period of time at all possible prices for that good.

Law of supply It consists in the fact that, other things being equal, the quantity of goods offered by sellers is the higher, the higher the price of this product, and vice versa, the lower the price, the lower the value of its supply.

On fig. 4.3 graphically depicts the relationship between the price of a product and the quantity that sellers are willing to offer for sale. Movement along the supply curve is called a change in the quantity supplied. If the price of a vacuum cleaner rises from 20 to 30 thousand rubles, then the number of vacuum cleaners offered will increase from 200 to 400 units. daily and vice versa.

Rice. 4.3.

S (English) supply ) - offer; R – price; Q - the amount of the offer

In addition to the price, the offer is also affected by non-price factors, among which the following stand out:

change in the firm's costs. Lower costs as a result of, for example, technical innovations or lower prices for raw materials lead to an increase in supply. Conversely, an increase in costs as a result of an increase in the price of raw materials or the imposition of additional taxes on the producer causes a decrease in supply;
tax cuts for manufacturers. It helps to stimulate the growth of supply, on the contrary, a decrease in subsidies from the state can lead to a reduction in supply;
increase (reduction ) the number of firms in the industry. Leads to an increase (decrease) in supply.

On fig. 4.4 the influence of non-price factors on supply is depicted as a shift in the supply curve to the right (increase in supply) or to the left (reduction in supply). In this case, we are talking about changing the offer.

Rice. 4.4.

S, S1, S2 - supply, respectively, initial, increased, decreased

Today, almost every developed country in the world is characterized by market economy where government intervention is minimal or non-existent. Prices for goods, their assortment, volumes of production and sales - all this is formed spontaneously as a result of the work of market mechanisms, the most important of which are law of supply and demand. Therefore, let us at least briefly consider the basic concepts economic theory in this area: supply and demand, their elasticity, the demand curve and the supply curve, as well as the factors that determine them, market equilibrium.

Demand: concept, function, graph

Very often one hears (sees) that such concepts as demand and the magnitude of demand are confused, considering them synonyms. This is wrong - demand and its value (volume) are completely different concepts! Let's consider them.

Demand (English Demand) - the solvent need of buyers for a certain product at a certain price level for it.

Demand quantity(volume demanded) - the quantity of goods that buyers are willing and able to purchase at a given price.

So, demand is the need of buyers for a certain product, provided by their solvency (that is, they have money to satisfy their need). And the magnitude of demand is the specific amount of goods that buyers want and can (they have the money to buy) to buy.

Example: Dasha wants apples and she has money to buy them - this is a demand. Dasha goes to the store and buys 3 apples, because she wants to buy exactly 3 apples and she has enough money for this purchase - this is the amount (volume) of demand.

There are the following types of demand:

individual demand- an individual specific buyer;
total (aggregate) demand- all buyers available on the market.

Demand, the relationship between its value and price (as well as other factors) can be expressed mathematically, as a function of demand and a demand curve (graphical interpretation).

Demand function- the law of dependence of the magnitude of demand on various factors influencing it.

- a graphical expression of the dependence of the quantity demanded for a certain product on the price of it.

In the simplest case, the demand function is the dependence of its value on one price factor:

P is the price of this product.

The graphic expression of this function (the demand curve) is a straight line with a negative slope. Describes such a demand curve the usual linear equation:

where: Q D - the amount of demand for this product;
P is the price for this product;
a is the coefficient that specifies the offset of the beginning of the line along the abscissa axis (X);
b – coefficient specifying the line slope angle (negative number).

line graph demand expresses an inverse relationship between the price of a product (P) and the number of purchases of this product (Q)

But, in reality, of course, everything is much more complicated and the amount of demand is affected not only by the price, but also by many non-price factors. In this case, the demand function takes the following form:

where: Q D - the amount of demand for this product;
P X is the price for this product;
P is the price of other related goods (substitutes, complements);
I - income of buyers;
E - expectations of buyers regarding price increases in the future;
N is the number of possible buyers in the given region;
T - tastes and preferences of buyers (habits, following fashion, traditions, etc.);
and other factors.

Graphically, such a demand curve can be represented as an arc, but this is again a simplification - in reality, the demand curve can have any of the most bizarre shapes.

In reality, demand depends on many factors and the dependence of its magnitude on price is non-linear.

Thus, factors affecting demand:
1. Price factor of demand- the price of this product;
2. Non-price factors of demand:

the presence of interrelated goods (substitutes, complements);
income level of buyers (their solvency);
the number of buyers in a given region;
tastes and preferences of buyers;
customer expectations (regarding price increases, future needs, etc.);
other factors.

Law of demand

To understand market mechanisms, it is very important to know the basic laws of the market, which include the law of supply and demand.

Law of demand- when the price of a product rises, the demand for it decreases, with other factors unchanged, and vice versa.

Mathematically, the law of demand means that there is an inverse relationship between the quantity demanded and the price.

From a philistine point of view, the law of demand is completely logical - the lower the price of a product, the more attractive its purchase and the greater the number of units of the product will be bought. But, oddly enough, there are paradoxical situations in which the law of demand fails and acts in the opposite direction. This is manifested in the fact that the quantity demanded increases as the price rises! Examples are the Veblen effect or Giffen goods.

The law of demand has theoretical background. It is based on the following mechanisms:
1. Income effect- the desire of the buyer to purchase more of this product at a lower price for it, while not reducing the volume of consumption of other goods.
2. Substitution effect- the willingness of the buyer to reduce the price of this product to give preference to him, abandoning other more expensive products.
3. Law of diminishing marginal utility- as the product is consumed, each additional unit of it will bring less and less satisfaction (the product "gets bored"). Therefore, the consumer will be ready to continue buying this product only if its price decreases.

Thus, a change in price (price factor) leads to change in demand. Graphically, this is expressed as a movement along the demand curve.

Change in the magnitude of demand on the chart: moving along the demand line from D to D1 - an increase in the volume of demand; from D to D2 - decrease in demand

The impact of other (non-price) factors leads to a shift in the demand curve - change in demand. With an increase in demand, the graph shifts to the right and up; with a decrease in demand, it shifts to the left and down. Growth is called expansion of demand, decrease - contraction of demand.

Change in demand on the chart: shift of the demand line from D to D1 - demand narrowing; from D to D2 - expansion of demand

Elasticity of demand

When the price of a good increases, the demand for it decreases. When the price goes down, it goes up. But this happens in different ways: in some cases, a slight fluctuation in the price level can cause a sharp increase(fall) in demand, in others, a change in price over a very wide range will have virtually no effect on demand. The degree of such dependence, the sensitivity of the quantity demanded to changes in price or other factors is called the elasticity of demand.

Elasticity of demand- the degree of change in the quantity demanded when the price (or other factor) changes in response to a change in price or other factor.

A numerical indicator reflecting the degree of such a change - elasticity of demand.

Respectively, price elasticity of demand shows how much the quantity demanded will change when the price changes by 1%.

Arc price elasticity of demand- used when you need to calculate the approximate elasticity of demand between two points on the arc demand curve. The more convex the demand curve is, the higher the elasticity error will be.

where: E P D - price elasticity of demand;
P 1 - the initial price of the goods;
Q 1 - the initial value of demand for goods;
P 2 - new price;
Q 2 - the new value of demand;
ΔP – price increment;
ΔQ is the increment in demand;
P cf. – average price;
Q cf. is the average demand.

Point elasticity of demand with respect to price- is applied when the demand function is given and there are values of the initial quantity of demand and the price level. It characterizes the relative change in the quantity demanded with an infinitesimal change in price.

where: dQ is the demand differential;
dP – price differential;
P 1 , Q 1 - the value of the price and the magnitude of demand at the analyzed point.

Elasticity of demand can be calculated not only in terms of price, but also in terms of income of buyers, as well as other factors. There is also a cross elasticity of demand. But we will not consider this topic so deeply here, a separate article will be devoted to it.

Depending on the absolute value of the elasticity coefficient, the following types of demand are distinguished ( types of elasticity of demand):

Perfectly inelastic demand or absolute inelasticity (|E| = 0). When the price changes, the quantity demanded practically does not change. Close examples are essential goods (bread, salt, medicines). But in reality there are no goods with a perfectly inelastic demand for them;
Inelastic demand (0 < |E| < 1). Величина спроса меняется в меньшей степени, чем цена. Примеры: товары daily demand; products that have no analogues.
Demand with unit elasticity or unit elasticity (|E| = -1). Changes in price and quantity demanded are fully proportional. The quantity demanded rises (falls) at exactly the same rate as the price.
elastic demand (1 < |E| < ∞). Величина спроса изменяется в большей степени, чем цена. Примеры: товары, имеющие аналоги; предметы роскоши.
Perfectly elastic demand or absolute elasticity (|E| = ∞). A slight change in price immediately raises (lowers) the quantity demanded by an unlimited amount. In reality, there is no product with absolute elasticity. A more or less close example: liquid financial instruments, traded on the exchange (for example, currency pairs on Forex), when a small price fluctuation can cause a sharp increase or decrease in demand.

Suggestion: concept, function, graph

Now let's talk about another market phenomenon, without which demand is impossible, its inseparable companion and opposing force - supply. Here one should also distinguish between the offer itself and its size (volume).

Offer (English "Supply") - the ability and willingness of sellers to sell goods at a given price.

Offer amount(volume of supply) - the quantity of goods that sellers are willing and able to sell at a given price.

There are the following offer types:

individual offer– a specific individual seller;
total (cumulative) supply– all sellers present on the market.

Offer function- the law of the dependence of the magnitude of the proposal on various factors influencing it.

- a graphical expression of the dependence of the supply of a certain product on the price of it.

Simplified, the supply function is the dependence of its value on the price (price factor):

P is the price of this product.

The supply curve in this case is a straight line with a positive slope. The following linear equation describes this supply curve:

where: Q S - the value of the proposal for this product;
P is the price for this product;
c is the coefficient that specifies the offset of the beginning of the line along the abscissa axis (X);
d is the coefficient specifying the line slope angle.

The supply line graph expresses a direct relationship between the price of a product (P) and the number of purchases of this product (Q)

The supply function, in its more complex form, which takes into account the influence of non-price factors, is presented below:

where Q S is the value of the offer;
P X is the price of this product;
P 1 ...P n - prices of other related goods (substitutes, complements);
R is the presence and nature of production resources;
K - applied technologies;
C - taxes and subsidies;
X - natural and climatic conditions;
and other factors.

In this case, the supply curve will be in the form of an arc (although this is again a simplification).

In real conditions, supply depends on many factors, and the dependence of supply volume on price is non-linear.

Thus, supply factors:
1. Price factor- the price of this product;
2. Non-price factors:

availability of complementary and substitute goods;
level of technology development;
quantity and availability necessary resources;
natural conditions;
expectations of sellers (manufacturers): social, political, inflationary;
taxes and subsidies;
market type and its capacity;
other factors.

Law of supply

Law of supply- when the price of a product rises, the supply for it increases, other factors remaining unchanged, and vice versa.

Mathematically, the law of supply means that there is a direct relationship between supply and price.

The law of supply, like the law of demand, is very logical. Naturally, any seller (manufacturer) seeks to sell their product at a higher price. If the price level in the market rises, it is profitable for sellers to sell more; if it falls, it is not.

A change in the price of a commodity leads to change in supply. On the graph, this is shown as a movement along the supply curve.

Change in supply on the chart: moving along the supply line from S to S1 - an increase in supply; from S to S2 - decrease in supply

A change in non-price factors leads to a shift in the supply curve ( change the proposal itself). Offer expansion- shift of the supply curve to the right and down. Supply narrowing- shift to the left and up.

Supply change on the chart: supply line shift from S to S1 - supply narrowing; from S to S2 - sentence expansion

Supply elasticity

Supply, like demand, can be in varying degrees depending on price changes and other factors. In this case, we talk about the elasticity of supply.

Supply elasticity- the degree of change in the supply quantity (the number of goods offered) in response to a change in price or other factor.

A numerical indicator reflecting the degree of such a change - supply elasticity coefficient.

Respectively, price elasticity of supply shows how much the supply will change when the price changes by 1%.

The formulas for calculating the arc and point elasticity of supply at a price (Eps) are completely similar to the formulas for demand.

Types of supply elasticity by price:

perfectly inelastic supply(|E|=0). A change in price does not affect the quantity supplied at all. This is possible in the short term;
inelastic supply (0 < |E| < 1). Величина предложения изменяется в меньшей степени, чем цена. Присуще short term;
unit elasticity supply(|E| = 1);
elastic supply (1 < |E| < ∞). Величина предложения изменяется в большей степени, чем соответствующее изменение цены. Характерно для долгосрочного периода;
perfectly elastic offer(|E| = ∞). The quantity supplied changes indefinitely for a slightly small change in price. Also typical for the long term.

Remarkably, situations with perfectly elastic and perfectly inelastic supply are quite real (unlike similar types of elasticity of demand) and are encountered in practice.

Demand and supply "meeting" in the market interact with each other. Under free market relations without rigid state regulation sooner or later they will balance each other (an 18th-century French economist spoke about this). This state is called market equilibrium.

A market situation where demand equals supply.

Graphically, the market equilibrium is expressed market equilibrium point- the point of intersection of the demand curve and the supply curve.

If supply and demand do not change, the market equilibrium point tends to stay the same.

The price corresponding to the market equilibrium point is called equilibrium price, quantity of goods - equilibrium volume.

Market equilibrium is graphically expressed by the intersection of demand (D) and supply (S) graphs at one point. This point of market equilibrium corresponds to: P E - equilibrium price, and Q E - equilibrium volume.

There are different theories and approaches explaining exactly how the market equilibrium is established. The most famous are the approach of L. Walras and A. Marshall. But this, as well as the cobweb-like model of equilibrium, the seller's market and the buyer's market, is a topic for a separate article.

If very short and simplified, then the mechanism of market equilibrium can be explained as follows. At the equilibrium point, everyone (both buyers and sellers) is happy. If one of the parties gains an advantage (the deviation of the market from the equilibrium point in one direction or another), the other party will be dissatisfied and the first party will have to make concessions.

For example: the price is higher than the equilibrium price. It is profitable for sellers to sell goods at a higher price and the supply rises, there is an excess of goods. And buyers will be dissatisfied with the increase in the price of goods. In addition, competition is high, supply is excessive, and sellers will have to lower the price in order to sell the product until it reaches the equilibrium value. At the same time, the volume of supply will also decrease to the equilibrium volume.

Or other example: the quantity of goods offered on the market is less than the equilibrium quantity. That is, there is a shortage of goods in the market. In such circumstances, buyers are willing to pay a higher price for the product than the one at which it is sold at the moment. This will encourage sellers to increase supply volumes while raising prices. As a result, the price and volume of supply/demand will come to an equilibrium value.

In fact, it was an illustration of the theories of market equilibrium by Walras and Marshall, but as already mentioned, we will consider them in more detail in another article.

Galyautdinov R.R.

Introduction

Describing the market, economists use the concept of "demand" to describe the behavior of buyers and the concept of "supply" to describe the behavior of sellers. The market is the interaction of buyers and sellers that determines the equilibrium price and the equilibrium quantity of the exchanged product.

To study the possible reaction of the consumer to certain price changes, the concept of "elasticity of demand" is used. This concept applies to both individual and market demand.

To determine the change in the level of volume and volume of sales at a certain point in time, the elasticity of supply is used.

aim term paper is the study of the elasticity of supply and demand.

Based on the goal, it is necessary to solve the following tasks:

Consider the concept of supply and demand;

Determine the factors affecting supply and demand;

Describe the elasticity of supply and demand;

To study the types of elasticity of demand;

Describe the application of elasticity theory.

The object of study is the elasticity of supply and demand.

The theoretical and methodological basis of the course work was the works of scientists on economic theory, management, personnel management.

The information basis was the data of the materials of the global Internet network.

The analysis used methods and approaches of economic theory.

Demand for a product and its elasticity

The concept of demand and its factors

demand elasticity supply economic

Demand refers to the amount of a product that buyers not only want, but can buy at any possible price in a certain period of time. Demand (solvent need), therefore, can be characterized as the relationship between the price and the quantity of the purchased goods.

Economists model demand, i.e. represent it as a model. Demand is considered as a function of many variables, the main of which is the market price of the goods. It is well known that the quantity of purchased goods depends on their price. The higher the price of a good, the less quantity people want to buy, and vice versa, the lower the price, the greater the demand for it. Economists call this relationship the law of demand. The law of demand - all other things being equal, the lower the price, the greater the quantity demanded, and vice versa, the higher the price, the less quantity demanded. Thus, there is an inverse relationship between price and quantity demanded.

The relationship between price and quantity demanded for any good can be illustrated using a demand curve. Demand curve - a graphical expression of the relationship between the price of a product and the amount of demand made by buyers for this product.

The demand curve (D) is descending, decreasing. This “behavior” of the curve reflects the law of demand, since the graph shows an inverse relationship between the price of good X (Px) and the quantity demanded for this good (Qx). In the figure below, a price drop from P1 to P2 leads to an increase in the quantity demanded from Q1 to Q2.

Rice. 1.1. Demand curve

Considering the category "demand", we focused on the impact of changes in the price of goods on the magnitude of demand. At the same time, it was assumed that only the price of the goods changes, while all other factors that can influence demand (consumer tastes, household incomes, prices for other goods, etc.) remain unchanged. But each of these factors affects the demand for good X, and under the influence of these factors, demand can change. In particular, at a constant market price of a product, consumers can demand more or less of it.

In the case when, under the influence of a change in some factor, the quantities demanded change at each given price, the entire demand curve shifts to the right or to the left parallel to itself; they say that there has been a change in demand - demand has increased or decreased.

If the D0 curve shifts to the right, demand increases. If the D0 curve shifts to the left, then demand will decrease. Non-price factors of demand are otherwise called non-price determinants of demand.

Rice. 1.2. Change in demand under the influence of non-price factors

The following determinants have the most significant impact on the behavior of buyers, and, consequently, on the shift in the demand curve.

1. Tastes and preferences of consumers, which, in turn, are determined by such factors as fashion, advertising, the quality of goods consumed, customs, traditions, etc. If consumer tastes change in favor of a given good, demand for it will increase and the demand curve will shift to the right.

2. The level of income of the population. An increase in consumer income leads to the fact that they demand more of a given good at each price, i.e. demand increases and the demand curve shifts to the right from position D0 to position D1. Accordingly, a decrease in the level of income of the population causes a decrease in demand and a shift in the demand curve to position D2.

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

4. Consumer expectations. If buyers expect changes in the price of goods, an increase or decrease in their income, certain government actions that affect the availability of goods, then this may affect their desire to purchase the goods at the moment, and therefore cause a change in demand. Thus, expectations of a future increase in the price of a commodity (inflationary expectations) spur demand; consumers tend to buy a product in large quantities today, fearing they will lose the opportunity to buy it in the future when the price of it rises. The result of rush demand will be a shift of schedule D to the right.

5. The effect of deferred demand is associated with the existence of cyclic fluctuations in demand over time - annual, quarterly, weekly fluctuations. So, during the year there are three "peaks" and three "failures" of demand. The first "peak" - the end of December - the beginning of January ( new year holidays), followed by a drop in demand. The second "peak" - February - March - in Russia also falls on holidays (February 23, March 8). The third "peak" usually falls on August - September (the period of mass holidays, the time of preparation for a new academic year). Cyclicity also exists during the month - there are two "peaks" - an advance payment and a salary. During the week, an increase in demand is observed before the weekend.

So, demand is influenced by both price and non-price factors. In this regard, one should not confuse changes in demand that occur under the influence of price and non-price factors. With a change in demand, the demand curve shifts, since in this case, at each price, a demand is made for a different (more or less) quantity of goods. Changes in demand can only occur if the non-price determinants of demand change. When all non-price factors are constant and do not change, and the price of the goods either increases or decreases, then we move from one “price-quantity of requested products” ratio, other things being equal, according to the law of demand, to another, new ratio “price-quantity of requested products ". Accordingly, when the price decreases from P1 to P2, there is a shift from point A to point B of the same demand curve. In such cases, due to the action of the law of demand, there is only a change in the magnitude (volume) of demand, a movement along the demand curve.