Market equilibrium- market condition with equal supply and demand marriage. Market equilibrium:

1. is established as a result of the interaction of households’ decisions to purchase a product and producers’ decisions to sell it;

2. expressed in the equilibrium price of the product and in its quantity actually sold on the market.

Market equilibrium

Market equilibrium is a situation in the market when the demand for a product is equal to its supply; The volume of the product and its price are called equilibrium.

Market equilibrium is characterized by equilibrium price and equilibrium volume.

Equilibrium price (equilibrium price)-- the price at which the volume of demand in the market is equal to the volume of supply. Sazhina M.A., Chibrikova G.G. Economic theory: Textbook for universities. - M.: Publishing House NORM, 2003, p. 48. On the graph of supply and demand, it is determined at the point of intersection of the demand curve and the supply curve.

Equilibrium volume (equilibrium quantity)-- the volume of demand and supply of a product at the equilibrium price.

Mechanism for achieving market equilibrium

The free movement of price in accordance with changes in supply and demand leads to the fact that goods sold in the market are distributed in accordance with the ability of buyers to pay the price offered by the manufacturer. If demand exceeds supply, then the price will rise until demand no longer exceeds supply. If supply is greater than demand, then in a perfectly competitive market the price will decrease until all the goods offered find their buyers.

Types of market equilibrium

Equilibrium can be stable or unstable.

If, after an imbalance, the market returns to a state of equilibrium and the previous equilibrium price and volume are established, then the equilibrium is called stable.

If, after disequilibrium is disturbed, a new equilibrium is established and the price level and volume of supply and demand changes, then the equilibrium is called unstable.

Types of stability:

1. Absolute;

2. Relative;

3. Local (price fluctuations occur, but within certain limits);

4. Global (Set for any fluctuations).

The equilibrium price functions are as follows:

1. Distribution;

2. Informational;

3. Stimulating;

4. Balancing.

Equilibrium in the goods market

Equilibrium in an economic system is a state in which each participant in this system does not want to change his behavior.

Good on the market actors are sellers and buyers who decide to sell or buy a certain amount of a good depending on its price. Equilibrium in the market occurs if all sellers and buyers can buy or sell the amount of good that they want to buy or sell.

Equilibrium in the market is a situation when sellers offer for sale exactly the same amount of good that buyers decide to purchase (the volume of demand is equal to the volume of supply).

Since sellers and buyers want to sell or buy different quantities of a good depending on its price, market equilibrium requires that a price be established at which the volumes of supply and demand coincide. In other words, the price equalizes the volumes of supply and demand.

The price that causes the volumes of supply and demand to coincide is called the equilibrium price, and the volumes of demand and supply at this price are called the equilibrium volumes of supply and demand.

In equilibrium conditions, the so-called clearing of the market occurs = there will be no unsold good or unsatisfied demand left on the market (buyers who want to buy the good at the established price and who were unable to do so due to the lack of sellers).

Thus, in order to find equilibrium in the market for a certain good, it is necessary to determine what price will cause in this market such a volume of supply that will correspond to the volume of demand = at this price, sellers will bring to the market exactly as much of the good they produce as buyers want to take away. This price is called the equilibrium price, and the volume of demand and supply corresponding to it = the equilibrium volumes of supply and demand.

How to determine balance?

To do this, you need to use the demand and supply functions and determine at what price value the supply and demand functions will give the same values

Let us assume that curve D in Fig. 1 is the consumer demand curve. And the S curve is the supply curve.

The curves intersect at some point A (in other words, they have a common point A), which shows the equilibrium values ​​of price and quantity in this market. The point of intersection of the supply and demand curves is called the equilibrium point.

Rice. 1. Balance point

Accordingly, at any price value below the equilibrium one, the opposite picture will be observed. Sellers will want to slightly reduce the volume of supply, since a decrease in price means a decrease in the profitability of production. And buyers will want to increase consumption, since more low price means an increase in their purchasing power and a decrease in the “difficulty” of purchasing goods. As a result, there will be a supply shortage (excess demand) = there will be consumers on the market who would like to purchase some more quantity of goods at this price, while all the goods brought by producers have already been sold.

Can curves not intersect?

Could a situation arise when it is impossible to establish equilibrium in the market with positive values ​​of price and sales volume? In the language of graphs, this would mean that the curves do not intersect, or, in other words, do not have common points.

Rice. 2. Situations when market equilibrium does not arise.

In principle, such a situation is possible. We can imagine the existence of two cases where the entire supply curve is above the demand curve.

The first case includes markets for goods, the production of which requires very high costs due to the high cost of the material (for example, chairs made of pure gold) or highly labor-intensive (a castle glued together from grains of sand). At the same time, not a single consumer will agree or simply will not be able (due to limited income) to pay for the production of these expensive goods. The supply curve will be much higher than the demand curve for these goods (Fig. 2.a). This means that market equilibrium occurs when zero values prices and quantities = that is, the market for such goods simply does not exist.

In another case, the production of goods may not require large expenditures, but the goods themselves may be completely useless for consumers. For example, the production of tablespoons without handles is cheap = but who would want to buy these spoons even “for free”? Therefore, in this case, no matter how cheap the production of these goods is, the demand curve will either coincide with the vertical axis (which practically means its absence), or be so close to it that there will be no common points with the supply curve (Fig. 2. b).

Equilibrium mechanism

How is equilibrium established in the market? How do sellers and buyers determine that a certain price is the equilibrium price and begin to transact only at that price?

The mechanism for establishing a single price may vary depending on the characteristics of the particular market and its participants.

Let us assume that no transactions have been made on the market at all and that sellers and buyers do not know each other’s desires and capabilities. Thus, we must determine how equilibrium is established in the new market.

In such a new market, first trial transactions are made, as a result of which the first buyers somehow negotiate the price with individual sellers and purchase the good. There is some price dispersion. Since the market is perfect (according to our assumption), each subsequent buyer and each seller knows at what prices transactions have already been made and focuses on the most profitable ones. Buyers will strive to buy at the lowest price and will go to those sellers who offer that price. Sellers will strive to sell the product at a higher price, but will not be able to offer a higher price for the product than others = they will be left without a buyer. At the same time, if sellers see that at the established price their product is sold out too quickly and they will soon find themselves without the goods, they will gradually raise the price. If they see that the goods will not sell out, they will begin to gradually reduce the price.

The speed with which the market finds the equilibrium price depends on the "mobility" of its participants and on the ease of transfer of information in the market (that is, on the perfection of the market).

For example, if sellers do not know what demand will be presented for their product (if, for example, a market for a good has just appeared), they will first estimate the demand and produce the appropriate amount of the good. If their estimate is too low and the product produced is not enough for consumers at the price they charge, sellers will increase price and output in order to increase profits. If there is still unsatisfied demand, sellers will again increase price and output, etc. Thus, gradually equilibrium in the market will be established at the point of intersection of the supply and demand curves.

In all the following days, sellers and buyers will know at what prices transactions were made earlier, and, starting the trading day, they will be guided by “yesterday’s” price. The new price will be adjusted during the trading process.

Market equilibrium- a condition in which no one, from economic entities there is no incentive to change it. In relation to supply and demand, the equilibrium point will be located at the intersection of the supply and demand curves

• Equilibrium according to Do not forget that Walras
• Marshall equilibrium

Equilibrium models

Economic models(including market equilibrium models) can be studied with or without taking into account the time factor.

If the time factor is not taken into account in the model, then this model is called static. If the time factor is one of the variables, then the model is called dynamic.

Equilibrium models in statics

• presentation and comparison of various market equilibrium states
• the mechanism of transition from one state to another is not studied
• time is taken into account only indirectly

The comparative statics method allows you to analyze shifts in demand, supply and equilibrium points under the influence of any exogenous factors.

As a rule, in static models they consider instantaneous, short-term, long-term periods activities of economic entities.

Instantaneous period

• the amount of produced resources (factors of production) does not change, i.e. all factors will be constant.
• the seller is deprived of the ability to adjust the quantity supplied to the volume demanded and the equilibrium price is determined only by the demand curve
• as a result, the supply curve will either be a strictly vertical line (for goods that cannot be stored) or have an increasing segment (for perishable goods)

Short term

• Some factors of production will be constant and some will be variable.
  The seller can adjust the amount of supply in accordance with market demand, but only within the limits production capacity enterprises.
• the supply curve consists of two sections, where Q* is the maximum possible volume of production at given capacities.
• the market price is determined by the interaction of supply and demand on the increasing segment of the supply curve, and only by demand on the vertical segment of the SS curve.

Long term

• all factors of production will be variable, which implies the possibility of changing the scale of production.
• Depending on the dynamics of costs (expenses), the production supply curve may look like:
  horizontal line- costs will be constant, and the equilibrium volume increases without changing the equilibrium price.
  rising line- costs increase, for example. due to rising prices for resources, and the growth of the equilibrium volume is accompanied by an increase in the equilibrium price.
  descending line— costs are reduced, and an increase in equilibrium volume is accompanied by an increase in equilibrium prices.

Equilibrium models in dynamics

Dynamic models The time factor is directly taken into account.

All variables in such models will be functions of time (for example: the rate of price change or the rate of change of volume)

Groping for balance according to Do not forget that Walras

Let's study the dynamic model of market equilibrium using direct demand functions.

Let t- time, then the process of groping or establishing balance According to one should not forget that Walras can be written by the following equation:

• ΔQ d (P) — excess demand at price P
• h - positive coefficient

If the quantity of demand is greater than the quantity of supply, that is, the surplus is greater than zero (a situation of commodity shortage), then the time derivative of price (the rate of price change) will also be greater than zero and, therefore, the price will rise. If the quantity demanded is less than the quantity supplied, then there is excess demand less than zero(situation of overstocking of the market), then the derivative will be less than zero, which means the price will fall.
Only under the condition ΔQ d (P) = 0 is market equilibrium established.

Marshall equilibrium

The process of interaction between supply and demand according to Marshall is described by the equation:

• ∆P(Q) — the demand price exceeds the supply price for a given sales volume Q.

If this excess is positive, then the volume of supply increases. If it is negative, then the volume decreases. The equilibrium condition will be the equality ∆Qd(p)= 0.

Special cases of market equilibrium

Equilibrium at zero price

The case of abundant resources.

Equilibrium at zero output

Production of the product is not economically feasible.

Not the uniqueness of equilibrium

For example: the labor market, when the supply curve has a decreasing segment.

Equilibrium uncertainty

The presence of supply and demand lines of a common segment - either horizontal or vertical.

Economic equilibrium

General theory of equilibrium is based on the following postulates:

• the main instrument of social life is the regulated market, and the most important activity will be the production of goods and services;
• economic activity is carried out in conditions of free competition under state control, and prices are determined under the influence of supply and demand;
• The goal of producers is to obtain maximum profits;
• The goal of consumers is to obtain maximum utility from minimum costs in meeting their needs;
• macroeconomic equilibrium appears as a result of joint actions of the state and business, factors of production, supply and demand.

Today there are quite a lot of models of macroeconomic equilibrium, the specificity of which is given by the author’s views on the problem and attempts to crystallize in them the main economic interests of the subjects economic activity. The material was published on http://site
From their entirety, certain fundamental models can be identified.

The most well-known models of economic equilibrium and their authors:

• F. Quesnay— described simple reproduction using the example of the French economy of the 18th century;
• K. Marx- drew up a diagram of simple and expanded capitalist social production and circulation (reproduction);
• V. Lenin— expanded the scheme of capitalist expanded reproduction by changing the organic structure of capital;
• L. Do not forget that Walras— proposed a model of general economic equilibrium under the law of free competition;
• V. Leontyev— announced the “Input-Output” model;
• J.M. Keynes— created a model of short-term economic equilibrium;
• J. Neumann— proposed a model of an equilibrium expanding economy.

Vary the following types equilibrium: partial, general, real and stable. IN to the greatest extent a well-known and detailed model of equilibrium under state regulation of the economy was developed by J. M. Keynes.

Keynes's position is even more noticeable when he discusses general economic state issues. Traditionally, it was believed that a nation's wealth was determined by its resources and savings. At the same time, Keynes believed that the wealth of a nation is determined by its ability to spend. You should not be afraid to spend assets that may turn into trash. Hence the basic idea of ​​Keynesianism: need to spend and spend, first of all, in the form of investments. It is precisely this that ensures economic growth and effectively eliminates unemployment and poverty.

• Equilibrium model Do not forget that Walras
• Marshall equilibrium model
• Web-like model of equilibrium

At whatever level historical development No matter what human society was, people, in order to live, must have food, clothing, housing and other material goods. The means of subsistence necessary for man must be produced. Their production takes place during the production process.

Production is the process of human influence on the substance of nature in order to create material goods and services necessary for the development of society. Historically, it has gone through a long development path from the manufacture of the simplest products to the production of the most complex technical systems, flexible reconfigurable complexes, computers. In the production process, not only the method and type of production of goods and services changes, but the moral improvement of the person himself occurs. In any society, production ultimately serves to satisfy needs. Needs are the need for something necessary to maintain the vitality of an individual, social group or society as a whole. Needs act as an internal impulse of active production activities. They predetermine the direction of production development.

Originally in primitive society, almost all human life activity was reduced to the development of material production, without which it was impossible to maintain an extremely low level of consumption of material goods. At further stages of development of human society and production, intellectual needs appear, the volume and structure of consumption increases, and the standard of living of people increases. In the conditions of perfect, highly developed industrial production, humanity has the opportunity to satisfy to a large extent all existing types of needs: material, spiritual and social. Improving the life of the population is manifested, first of all, in more complete satisfaction of material needs for food, clothing and footwear, housing, working conditions and other vital goods.

IN market conditions The most important elements of the functioning of the market mechanism are determined by supply and demand, which determine the market price of a product. The process of market functioning includes many commodity exchange operations, each of which involves a buyer, represented by the demand for goods and services, and a seller, on whose side is the supply of services.

As a result of the interaction of supply and demand, a market price is established, which is fixed at the point where the demand curves D and supply curves S intersect at the equilibrium point, and the price in this case is called equilibrium. Only at this single point the price suits both the buyer and the seller at the same time.

In this case, the laws of market pricing apply: the price tends to a level at which demand is equal to supply; If, under the influence of non-price factors, there is an increase in demand with a constant supply or a reduction in supply with a constant demand, then the price will increase if, on the contrary, with a constant supply, demand decreases or with a constant demand, supply increases.

All these provisions are clearly reflected in the supply and demand graph in Fig. 1.

Market equilibrium– a situation in the market when demand (D) and supply (S) are in a state of equilibrium, which is characterized by an equilibrium price (P e) and an equilibrium volume. Those. the volume of demand (Q D) is equal to the volume of supply (Q S) at a given equilibrium price (P e) (Fig. 2).

.

Equilibrium price– a single price at which the equilibrium quantity of a good is sold and purchased.

Rice. 2. Market equilibrium

But the state of equilibrium in the market is unstable, because changes in market demand and market supply cause changes in market equilibrium.

If the real market price (P 1) is higher than P e, then the volume of demand (Q D) will be less than the volume of supply (Q S), i.e. arises surplus of goods(DQ S). Excess supply always acts in the direction of lowering prices, because sellers will strive to avoid overstocking.

To avoid price changes, producers can reduce supply (S®S 1), which will lead to a reduction in volume to Q D (Fig. 6.1, a).

If the real market price (P 1) turns out to be lower than the equilibrium price P e, then the volume of demand (Q D) exceeds the volume of supply Q S, a shortage of goods(DQ D). A shortage of a product tends to increase its price. In this situation, buyers are willing to pay more high price for product. Pressure from demand will continue until equilibrium is established, i.e. until the deficit becomes zero (DQ D =0).

The law of diminishing marginal utility (successive increases in the consumption of a good leads to a decrease in the utility from it) explains the negative slope of the demand curve (D). That is, each consumer, in accordance with the decreasing utility of the product, buys it large quantity only if the price is reduced.

Using the demand curve you can determine consumer gain (surplus) - this is the difference between the maximum price that a consumer can pay for a product (demand price) and the real (market) price of this product.

The demand price for a product (P D) is determined by the marginal utility of each unit of the product, and the market price of a product is determined by the interaction of demand (D) and supply (S). As a result of this interaction, the product is sold at the market price (P e) (Fig. 3).

Rice. 3. Consumer and producer surplus

Therefore, the consumer wins by buying a product cheaper than he could pay for it. This gain is equal to the area of ​​the shaded triangle P D EP e (Fig. 3).

Knowing marginal costs (MC) allows you to determine manufacturer's gain. The fact is that the minimum price at which a firm can sell a unit of output without loss should not be lower than marginal cost (MC) (the increase in costs associated with the production of each subsequent unit of output) (Fig. 6.2). Any excess of the market price of a unit of production over its MS will mean an increase in the firm's profit. Thus, manufacturer's gain – this is the amount of excess of the selling price (market price) over the marginal costs of production. The firm receives such a surplus from each unit of goods sold at a market price (P e) that exceeds the marginal cost (MC) of producing that unit. Thus, by selling the volume of goods (Q e) (at different MS for each unit of production from 0 to Q E) at P E, the company will receive a gain equal to the shaded area P e EP S.

Market equilibrium is a situation in the market when the demand for a product is equal to its supply; The volume of the product and its price are called equilibrium.

Market equilibrium is characterized by equilibrium price and equilibrium volume.

Equilibrium price is the price at which the volume of demand in the market is equal to the volume of supply. On a supply and demand graph, it is determined at the point of intersection of the demand curve and the supply curve.

Equilibrium quantity is the volume of demand and supply of a product at the equilibrium price.

Equilibrium can be stable or unstable.

If, after an imbalance, the market returns to a state of equilibrium and the previous equilibrium price and volume are established, then the equilibrium is called stable.

If, after disequilibrium is disturbed, a new equilibrium is established and the price level and volume of supply and demand changes, then the equilibrium is called unstable.

Types of stability:

1. Absolute;

2. Relative;

3. Local (price fluctuations occur, but within certain limits);

4. Global (Set for any fluctuations).

Equilibrium stability means the ability of a market, taken out of equilibrium, to return to it again under the influence only of its internal factors.

Macroeconomic equilibrium models are considered in all major currents of economic thought. The first who tried to present a picture of the circulation of goods and money on the scale of the entire society was Francois Quesnay (16941774)- head of the school of physiocrats. In his Economic Table he gave a description big picture simple reproduction. Having divided society into three classes: landowners, farmers and artisans, depending on their participation in the reproduction process, he showed where the total and net product is created, how it is distributed, where income arises, how costs are reimbursed (for equipment, land improvement, rental fee, seeds). F. Quesnay was mistaken in believing that the pure product is formed in agriculture, but his ideas were later developed in reproduction schemes, principles for calculating the gross product of society, and in models of national economic balance.

An important place in the analysis of social reproduction was given to the theories of Jean Baptiste Say (1767-1832), a French economist who widely propagated the ideas of A. Smith in France. He is known for his Say's law, proposed by him in 1803. In accordance with this law, real aggregate demand is capable of automatically absorbing the entire volume of products produced in society with existing technology and resources. In other words, supply creates its own demand. According to Say's position, goods are created only in order to obtain some benefits with the money raised. The volume of production produced automatically provides income equal to the cost of all created goods, sufficient for their full sale. As a result, the economic system is automatically maintained in a state of equilibrium.

Say's main idea was supported by representatives classical direction economic thought, and is shared by supporters of the neoclassical movement of modern economic science, who supplemented this theory with such categories as interest rates, wage, the level of prices in the country, which are considered flexible and capable of balancing markets. As already mentioned above, the Keynesians hold the opposite point of view on the possibility of automatically maintaining equilibrium in the economy.

The provisions of Say's theory were expanded and mathematically substantiated by the outstanding Swiss scientist Leon Walras (1834-1910), one of the founders of the theory of marginal utility. He proceeded from the fact that the problem of general economic equilibrium is solvable, and this can be proven mathematically. L. Walras' model is a system of linear equations, where a separate equation is allocated for each product. Since from a practical point of view it is hardly possible to solve this system of equations, the Walras model is theoretical in nature and shows an ideal economic system. The main role in the Walrasian system is played by equilibrium prices, i.e. prices that ensure equality of supply and demand for each product. Thus, his model, although macroeconomic in form, is based on microeconomic indicators. In its final form, the system of equations of L. Walras is written as follows:

m

Σ Pi Xi = ΣVj Yj ,

i =1 j =1

where: P i prices of final goods and services of the i type;

Xi is the quantity of goods and services of that type;

Vj – prices of production resources of the j type;

Yj is the amount of production resources of the j type.

This formula reads like this: the total supply of final products in monetary terms must be equal to the total demand for them as the sum of income brought by all factors of production to their owners.

The continuation and development of the ideas of L. Walras is intersectoral balance, which is also called a cost-output chess table. The task of this model is to determine the natural flows of resources (costs) to create a unit of the final product. For the first time, this task was implemented in the USSR when compiling the national economic balance of the Soviet economy for 1923/24 under the leadership of P. Popov (1872-1950), a prominent Soviet statistician, the first manager of the Central Statistical Office. However, in world economic thought, this model is associated with the name of Vasily Leontiev (1906-1999), an American economist of Russian origin. He built a macroeconomic model of general market equilibrium based on the structural interdependencies of all phases of reproduction: production, distribution, exchange and consumption. The chess balance diagram can be represented as a table of elements consisting of four quadrants. In mathematical form, it is written as a system of linear equations of the form:

where aij are technological coefficients of direct costs, showing how much output from industry i needs to be spent to produce a unit of output from industry j.

In matrix form, the Leontief model has the following form:

X = AX + Y, where X = (X 1, X2....X n) – production volume of any industry; У = (У1, У2,….У n) – the final product of this industry;

A = matrix of technological coefficients of direct costs.

This model allows, for a given product X, to determine the output of the final product Y or, for a given final product, to calculate the volumes of gross output required for its production in sectors of the economy. It reflects all the leading factors, indicators and proportions of the economy: spheres and sectors, gross output, gross national product, intermediate product, national income, all material flows, export-import relations. From it you can get different kinds equilibrium: sectoral, intersectoral, general. Trace how the growth of production in one industry causes the growth of other industries.

The problem of social reproduction occupies a very important place in the theory of K. Marx (1818-1883). The third volume of his main work, Capital, presents schemes for simple and expanded social reproduction. They reflect the processes of exchange between divisions I and II of social production (production of means of production and production of consumer goods). Conclusions are formulated about the conditions for the implementation of the total social product. V.I. Lenin (1870-1924) developed the theory of reproduction of K. Marx. Having analyzed the schemes for the sale of the social product in the conditions of technical progress (with an increase in the organic structure of capital), he concluded about the operation of the law of preferential growth in the production of means of production.

2 EQUILIBRIUM PRICE

The free movement of price in accordance with changes in supply and demand leads to the fact that goods sold in the market are distributed in accordance with the ability of buyers to pay the price offered by the manufacturer. If demand exceeds supply, then the price will rise until demand no longer exceeds supply. If supply is greater than demand, then in a perfectly competitive market the price will decrease until all the goods offered find their buyers.

Equilibrium price is the price in a competitive market at which the quantity of goods and services that consumers are willing to buy exactly matches the quantity of goods and services that producers are willing to supply. The equilibrium price is:

– the price at which supply and demand are equal;

– a price at which there is neither a shortage nor an excess of goods and services;

– a price that does not show a tendency to increase or decrease.

Neither sellers nor buyers have incentives to change the market situation if equilibrium is established, that is, balance takes place. In the event of the formation of any price other than the equilibrium one, sellers and buyers receive an effective incentive to transform the situation in the market.

The Marshall equilibrium price is formed for the following reasons:

– the influence of the excess of the demand price over the supply price (when the volume of supply is below the equilibrium level) - the reaction of sellers is to increase the volume of supply

– the influence of the excess of the supply price over the demand price (when the volume of supply is above the equilibrium level) - the reaction of sellers is expressed in a decrease in the volume of supply

The demand price coincides with the supply price in the case of equilibrium volumes of supply and demand.

The equilibrium price according to Walras is formed for the following reasons:

– the influence of excess supply volume over demand volume (when the market price exceeds the equilibrium price) - there is pressure from excess supply on the price (through competition among sellers), the market price decreases;

– the influence of the excess of the volume of demand over the volume of supply (when the market price is lower than the equilibrium price) - there is a pressure of excess demand on the price (through buyer competition), the market price rises.

Equilibrium price functions:

1. Distribution;

2. Informational;

3. Stimulating;

4. Balancing.

In conditions of free competition, under the influence of the laws of market pricing, the price is automatically equalized. However, market pricing can be disrupted either by the activities of monopolies or by government intervention, which arbitrarily sets prices above or below the equilibrium point. In such cases, they talk about “floor” and “ceiling” prices. The ceiling price limits the price increase in the upward movement of the price - this is an artificially low price. The price of the floor does not allow the price to fall beyond this limit - it is an artificially high price. Therefore, on the chart, the floor price will be set above the equilibrium point, and the ceiling price below.

Ceiling prices are lower than the equilibrium price and prevent the market price from rising to the equilibrium level. Reduced prices are usually established as a result of government policies aimed at “freezing” prices, i.e. fixing them at a certain level in order to stop inflation and prevent a decline in living standards. Shortages of goods that arise as a result of prices being lower than the equilibrium level are usually solved by rationing demand through the introduction of rationed distribution.

TESTS

3. Which of the following factors will shift the demand curve for a product to the right:

a) price increase;

b) decrease in income;

c) income growth;

d) price reduction;

e) cheaper substitute goods.

4. The reason for a drop in the price of a product may be:

a) an increase in taxes on private enterprise;

b) growth in consumer income;

c) a fall in the price of production resources;

D) a fall in the price of a complementary good.

5 The presence of excess supply of goods on the market may be a consequence of the fact that:

a) the price of the product is equal to the equilibrium price;

b) the price of the product is below the equilibrium price;

c) the volume of supply of this product has decreased;

G) the price of the product is higher than the equilibrium price;

e) the volume of demand for a given product has increased.

CONCLUSION

Thus, market equilibrium is a state of the economy in which the quantity of a good demanded at a given price for it is equal to the quantity of a given good offered for sale at the corresponding price. The zone of economic space in which the interests of both sellers and buyers are present is called the economic region. IN real life transactions for the purchase and sale of goods can be carried out at any price, limited by the demand price above and the supply price below. The actual transaction price will depend on many additional factors:

– on the balance of forces (when it comes to the dominance of sellers in the market (monopoly), naturally, transactions will be concluded at an inflated price, in the opposite situation - the dominance of the buyer (monopsony) - on the contrary, transactions will be concluded at the lowest price; if there is no certain balance of forces , then the prices may be set in any range);

– from irrational behavior due to lack of awareness and lack of experience among transaction participants. There is only one stable point in the entire space, i.e. such an equilibrium when it is not beneficial for either side to change the position. At the equilibrium point, market behavior is optimized.

The price at which the quantity of a good supplied on the market is equal to the quantity demanded is called the equilibrium price, and the volume of the good corresponding to this price is called the equilibrium quantity. The equilibrium price is set at the point of intersection of the supply and demand curves. This is the optimal price. If the price on the market is less than the equilibrium price, there is a shortage of goods, i.e. shortage; When the price is higher than the equilibrium price, overstocking occurs due to the presence of unsaleable products. In both cases, the market mechanism puts pressure on prices from above or below and sets the price at the equilibrium level.

A market is a mechanism for interaction between buyers and sellers, which ultimately presupposes a certain relationship between supply and demand. If the interests of producers and consumers coincide, it is achieved market equilibrium– a market situation when the quantities of supply and demand coincide or are equivalent at a price acceptable to the consumer and producer. The economic meaning of this equilibrium is that it reflects the unity of sellers and buyers, the equality of their opportunities and desires. Equilibrium is the law for every competitive market. Thanks to the balance on each commodity market the balance of the economic system as a whole is maintained.

Due to an increase or decrease in demand and/or supply, changes occur in equilibrium quantities of goods and equilibrium prices. As a result of the interaction of supply and demand or the interaction of the demand price and the supply price, the market price is established (Fig. 2.5).

Rice. 2.5. The equilibrium price and quantity of the product are determined

market demand and supply

It is fixed at the point where the supply and demand curves intersect (point E). This point is called balance point and the price is equilibrium. Only at the equilibrium point does the price satisfy both the buyer and the seller. Indeed, it is not profitable for manufacturers to further increase prices and increase supply volumes, since then the product will not find demand. The consumer should also not count on lower prices, since this is contrary to the interests of producers.

If the market price is below the equilibrium price, then shortage, in which the quantity demanded exceeds the quantity supplied. When the market price is higher than the equilibrium price, then surplus of goods, in which the quantity supplied exceeds the quantity demanded. In other words, when the market price is higher than the equilibrium price, it leads to surpluses and dissatisfaction among sellers. Lower prices, on the contrary, lead to shortages and customer dissatisfaction. Inventory increase, overstocking puts downward pressure on prices. This is the result of the fact that sellers have difficulty selling products, which leads to a reduction in supply and causes the seller to competitively lower the price to the equilibrium price.

Thus, equilibrium price is the price at which the quantity of a good supplied on the market is equal to the quantity of the good demanded.

If the price rises above the equilibrium point, it will stimulate an increase in production. Competition will begin between producers of this type of product, as a result of which a surplus of goods will form and its price will begin to decline, approaching the equilibrium point. On the contrary, if the price is below the equilibrium point, it will increase competition between buyers. This will increase the price, expand production and return the price to the equilibrium price.

Demand may change due to fluctuations in consumer tastes or income, changes in consumer expectations, or fluctuations in the prices of related products. And supply can change under the influence of changes in resource prices, technology or taxes (Fig. 2.6).

Rice. 2.6. Changes in supply and demand and their impact on the price and quantity of the product:
a – increase in demand; b – decrease in demand; c – increase in supply;
d – decrease in supply

Our analysis would be incomplete if we did not consider the effect of changes in supply and demand on the equilibrium price.

Change in demand . Let us first analyze the consequences of changes in demand, assuming that supply remains constant. Suppose that demand increases as shown in Figure 2.6a. An increase in demand, other things being equal (supply), gives rise to the effect of increasing prices and the effect of increasing the quantity of the product. As shown in Figure 2.6b, a decrease in demand reveals both the effect of a price reduction and the effect of a reduction in the quantity of a product. So, there is a direct connection between changes in demand and the resulting changes in both the equilibrium price and the quantity of the product.

Change of offer . Now consider the effect of a change in supply on price, assuming that demand is constant. When supply increases, as shown in Figure 2.6c, the new intersection point of supply and demand is located below the equilibrium price. However, the equilibrium quantity of the product increases. When supply decreases, this leads to an increase in the price of the product. Figure 2.6d illustrates a similar situation. In this case, the price increases and the quantity of the product decreases. An increase in supply generates the effect of lowering prices and the effect of increasing the quantity of the product. So, there is an inverse relationship between a change in supply and the resulting change in the equilibrium price, but the relationship between a change in supply and the resulting change in the quantity of product remains direct.

It is clear that there may be many more complex cases when both supply and demand change. There are two possible cases where supply and demand are assumed to move in opposite directions. First case. Let's assume that supply increases and demand decreases. An increase in supply leads to an increase in the equilibrium quantity of a product, while a decrease in demand leads to a decrease in the equilibrium quantity of a product. The direction of change in the quantity of a product depends on the relative parameters of changes in supply and demand.

The second possible case is when supply decreases and demand increases. There are two effects of price increases here. The impact on the equilibrium quantity of the product in this case is equally directed and depends on the relative parameters of changes in supply and demand. If the decrease in supply is relatively greater than the increase in demand, the equilibrium quantity of the product will be less than it was initially. However, if the decrease in supply is relatively less than the increase in demand, the equilibrium quantity of the product will increase as a result of these changes.

What happens when supply and demand move in the same direction? Here we should compare two opposite influences on price - the effect of a decrease in price as a result of an increase in supply and the effect of an increase in price as a result of an increase in demand. If the scale of the increase in supply is greater than the scale of the increase in demand, then ultimately the equilibrium price will decrease. If the opposite happens, the equilibrium price will rise. The effect on the equilibrium quantity of a product is clear: an increase in both supply and demand leads to an increase in the quantity of the product.

May occur special cases, when a decrease in demand and a decrease in supply, on the one hand, and an increase in demand and an increase in supply, on the other, completely neutralize each other. In both of these cases, the final effect on the equilibrium price is zero and the price does not change.

Equal to each other.

But a situation always arises when, when various factors change, an imbalance arises between supply and demand and market equilibrium is lost. Early economists, representatives of the classical school, viewed market equilibrium as a situation capable of independently arriving at a point of equality. They believed that the market has the ability to self-regulate and comes to equilibrium on its own without any external intervention.

IN economic theory There are two approaches to considering market equilibrium.

1 approach. According to Walras.

Swiss economist Leon Walras considered market equilibrium based on their quantitative assessment. Let's look at this approach on a graph.

The point \mathrm E shows the initially established equilibrium in the market, which corresponds to (\mathrm Q)_\mathrm E quantity of goods at the price (\mathrm P)_\mathrm E . It is at point \mathrm E that the demand and supply curves intersect, which indicates that at such a volume and price of a product, supply and demand are equal. But when the price of a product increases to the level (\mathrm P)_1, the quantity demanded will decrease to the level \mathrm Q_1^\mathrm D , and the volume of supply of the product, on the contrary, will increase to the level \mathrm Q_1^\mathrm S . A producer surplus will arise, as a result of which sellers, trying to get rid of excess goods, will begin to reduce prices for them. As a result, the demand for cheap goods will begin to grow. This cycle will continue until equilibrium is restored in the market.

When the price of a product decreases to the level (\mathrm P)_2, the demand for it will increase to the level \mathrm Q_2^\mathrm D and will exceed supply, which will decrease to the level \mathrm Q_2^\mathrm S . A consumer surplus will arise, resulting in a shortage of goods in the market. But excessive hype for a cheap product will put pressure on the price, which will sooner or later begin to rise. And when prices rise, producers, in turn, will begin to increase the supply of goods until the market is saturated.

The condition for establishing market equilibrium according to Walras can be represented as an equality:

Q_D(P)\;=\;Q_S(P).

This equality shows that according to Walras, the quantities of supply and demand are a function of price.

2nd approach. According to Marshall.

English economist and one of the main representatives of neo classical school Alfred Marshall believed that price is the only factor that establishes market equilibrium.

This graph also shows the equilibrium point \mathrm E at which supply and demand are equal. But if the demand price \mathrm P_1^\mathrm D exceeds the supply price \mathrm P_1^\mathrm S , producers will immediately respond to this by increasing supply from the level (\mathrm Q)_1 to the level (\mathrm Q)_ \mathrm E and the price will be set at the level (\mathrm P)_\mathrm E . If the demand price \mathrm P_2^\mathrm D is lower than the supply price \mathrm P_2^\mathrm S , then sellers will reduce the quantity supplied, and buyers will reduce their demand, as a result of which the equilibrium price will be restored.