DEMAND AND SUPPLY

Demand and Supply

Introduction

Pricing in the market develops, depending on supply and demand - the main economic levers of a market economy. By its very nature the market economy is unstable and is in constant motion. From the microeconomic point of view of the definitions of the market the most appropriate is the following: the market - a mechanism of interaction between buyers and sellers, in other words, the ratio of supply and demand (Kay, pp. 251-296).

In economics there is a very effective tool to explain these and many other changes in the economic environment. It is called the theory of supply and demand. This theory shows how consumers' preferences determine the demand for goods, while the costs of enterprises are the basis for supply of goods. If, for example, notice that the prices of oil fell, then the explanation is either in the fall of demand, either in the growth of its proposal. The same is true for each market, ranging from computers, diamonds, and ending with the land: changes in supply and demand lead to changes in output and prices (Coyle, pp. 184-225).

The concept of supply and demand shows how they operate in competitive markets with respect to individual goods (goods and services). First, we consider the demand curve, then the supply curve. Using these basic concepts, we will see how to determine market prices, or how they reach their competitive equilibrium in a place where the two curves intersect and where the forces of supply and demand are in balance. It is the movement of prices - the price mechanism, balances or lead to equilibrium of supply and demand (Kay, pp. 251-296).

Discussion

Demand

One of the fundamental concepts of market economy, supported by monetary means the possibility of desire, the intention of buyers, consumers buy the product. Demand is characterized by its size, meaning the amount of goods that the buyer is willing and able to buy at a given price at a given time period. Volume and structure of demand depends on the prices of goods, and from other non-price factors, such as fashion, consumer income, and TM. The price of other goods, including goods and substitutes for the conjugate, related products (Smith, Pp. 50-108).

Supply

In economics, supply is the quantity of goods or services that seller willing and able to sell (offer) at a given price at a given time period (Smith, Pp. 50-108).

The relationship between demand and price Demand depends on the purchase price: the higher the price rises, the demand decreases, it is said to feature "decreasing" its price. Demand is said to be elastic with respect to price. This elasticity is denoted by e and ask price. It equals the relative change in quantity demanded to changes reported on the prize (Bullock, Pp. 50-108).

Application / Price = Rate of change of the Application / Percentage change in price

More elasticity is near zero, demand is more rigid compared to the price the more it moves away, the more ...