- the situation on the market, characterized by identical values ​​of supply and demand (subjects do not have incentives to change such a conjuncture). Market equilibrium point on the graph is located at the intersection of the curves:

The area of ​​the economic space where the interests of buyers and producers intersect is called economic area. The end consumer can buy goods at a wide variety of prices, the value of which depends on a large number of factors, such as the level of competition in the industry, poor awareness of a fair price, and others. However, there is a stable point at which it is unprofitable for the parties to the transaction to change anything. The price offered by the seller for the goods is called equilibrium price, the volume of products on the market - respectively equilibrium volume.

Market equilibrium is a temporary situation that persists as long as supply and demand are not affected by non-price factors.

Postulates of the general theory of equilibrium

The general theory of market equilibrium is based on the following postulates:

• It is peculiar to the market, and prices are formed only depending on the supply / demand ratio (the state does not interfere).

• Regulated is the basic and most important tool for the life of society.

• Producers strive to maximize income, while buyers strive to meet needs and spend as little as possible.

• Market equilibrium is the result of interaction between the state, business, and end consumers.

Market equilibrium: what can it be?

There are two types of market equilibrium:

• Partial equilibrium it is possible when manufacturers offer certain types of goods to certain groups of consumers.

• General equilibrium characterized by the correspondence between the total production of goods and the amount of national income intended for consumption.

Market Equilibrium: Known Models

There are two most famous market equilibrium models:

1. 1. Walras model. Leon Walras - a Swiss mathematician, the founder of the mathematical direction in economic analysis - presented a model that considered supply / demand functions as direct:

Market equilibrium

To graphically display the interaction of supply and demand on the graph, the supply and demand curves are combined (Fig. 4.3.1). The coincidence of the interests of buyers and sellers on the chart characterizes the point of intersection of the supply and demand curves (E). This point is usually called the market equilibrium point, since the demand at it is exactly balanced by the supply. Market equilibrium- the approximate equality of supply and demand for a particular product at a given time and in a given market.

The point of market equilibrium corresponds to the equilibrium price

P E = P S = P D

and the equilibrium volume

Q E \u003d Q S \u003d Q D.

Rice. 4.3.1. The balance of supply and demand

Equilibrium price- the price of a good that is established in the market when balancing the supply and demand for this product. Equilibrium volume- the volume offered and sold on the market at the formed equilibrium price, equal to the prices of the producer and consumer. Market equilibrium is achieved when an equilibrium price is established at which the quantity demanded is equal to the quantity supplied. At any other price level, the volumes of supply and demand do not coincide. If the real price is higher than the equilibrium price (P 1 > P E), then there is an excess supply. The graph clearly shows that at this price, sellers are willing to offer significantly more goods than buyers can buy (Q 1S > Q 1D). If the price is below the equilibrium price (Р 2< P Е), возникает избыток спроса (или недостаточное количество товара – его дефицит), т.е. количественно предложение меньше спроса (Q 2S < Q 2D).

The equilibrium price fulfills the series functions:

1) informational - its value serves as a guideline for all subjects of a market economy;

2) normalizing - it normalizes the distribution of goods, signaling to the consumer whether this product is available to him and how much consumption he can count on at the current level of income. At the same time, it affects the producer, showing whether he can recoup his costs or whether he should refrain from producing this product. Thus, the producer's demand for resources is normalized through market prices;

3) stimulating - it forces the manufacturer to expand or reduce production, change technology and assortment so that the costs “fit” into the price and there is still some profit left.

The equilibrium in the market is often disturbed either under the influence of demand factors or under the influence of supply factors. The change in the position of the market equilibrium point is shown in Figure 4.3.2.

Rice. 4.3.2. Shift of the market equilibrium point

Figure 4.3.2, a shows an upward shift in the demand curve (to the right), which leads to an increase in the equilibrium price from P E 1 to P E 2 while increasing the equilibrium volume from Q E 1 to Q E 2.

A decrease in demand (Fig. 4.3.2, b) leads to a shift of its curve to the left, a decrease in the equilibrium price from P E 1 to P E 2 while reducing the equilibrium volume from Q E 1 to Q E 2. A decrease in market supply (Fig. 4.3.2, c) is accompanied by a shift of its curve to the left, which leads to an increase in the equilibrium price from P E 1 to P E 2 while reducing the equilibrium volume from Q E 1 to Q E 2. The growth of market supply (Fig. 4.3.2, d) leads to a shift of its curve to the right, a decrease in the equilibrium market price from P E 1 to P E 2 while increasing the equilibrium volume from Q E 1 to Q E 2.

On sections of supply and demand curves preceding the point of market equilibrium, the equilibrium price is lower than the maximum price at which some consumers could buy the product, and above the minimum price at which the most advanced producers could sell the product (Fig. 4.3.3). The quantity of products Q A consumers would be willing to buy at a price P AD > P E, and producers would be willing to sell at a price P AS< P Е. В действительности все сделки были осуществлены по равновесной цене, т.е. покупатели этого товара заплатили меньше, а производители получили больше, чем ожидали. В итоге и те, и другие получают выгоду в виде излишков потребителя и производителя.

Rice. 4.3.3. consumer and producer surplus

consumer surplus is the difference between the amount of money that the consumer was willing to pay and the amount that he actually paid. Producer Surplus- this is the difference between the amount of money for which the manufacturer agreed to sell his product, and the amount that he actually received. Public benefit of sellers and buyers is the sum of consumer and producer surpluses. However, along with the winners from the equilibrium price, there are also losers. The equilibrium price, performing its functions, made this product inaccessible to a certain number of poorer consumers (the demand curve to the right of point E) and its production unprofitable for producers with production costs exceeding the market price (the segment of the supply curve to the right of point E).

In economics, it is customary to distinguish three periods: instantaneous, in which all factors of production are considered constant, short (short-term), in which one group of factors is considered constant, and the other as a variable, and long-term (long-term), in which all factors of production are considered like variables. According to these periods, instantaneous, short-term and long-term equilibrium are distinguished.

In the instantaneous period (Fig. 4.3.4, a), the seller is deprived of the opportunity to adjust the volume of supply to the volume of demand, since he has a strictly fixed amount of goods. In this case, the equilibrium price is determined solely by demand, it coincides with the demand price, while the volume of sales depends only on the volume of supply.

Rice. 4.3.4. Equilibrium in the instantaneous and short period

In the short (short-term) period, the production capacities of the enterprise are considered unchanged, but the intensity of their use may change (in one, two, three shifts). Consequently, the volume of used variable resources and the volume of output change. In this case, the supply line consists of two segments (Fig. 4.3.4, b). The first segment, which has a positive slope, is limited along the abscissa by a point corresponding to the production capacity Q K. The second segment is represented by a vertical segment, which indicates the impossibility of going beyond the limits of the available production capacity in a short period. Up to this boundary, the equilibrium volume and price are determined by the intersection of supply and demand lines, and beyond it, as in the instantaneous period, the price is determined by demand, while the supply volume is determined by the size of production capacities.

In the long run, the manufacturer can change both the intensity of the use of production capacities and their size, i.e. possible change in the scale of production. In this case, three situations are possible. In the first case (Fig. 4.3.5, a), when the change in the scale of production occurs at constant costs, the growth of the equilibrium volume occurs without a change in the equilibrium price. In the second case (Fig. 4.3.5, b), the change in the scale of production occurs at increasing costs (for example, due to an increase in prices for the resources used). An increase in the equilibrium volume is accompanied by an increase in the equilibrium price.

Rice. 4.3.5. Equilibrium in the long run

In the third case (Fig. 4.3.5, c), when a change in the scale of production occurs at decreasing costs (for example, due to a decrease in prices for the resources used), an increase in the equilibrium volume is accompanied by a decrease in the equilibrium price.

FEDERAL AGENCY FOR EDUCATION

State educational institution of higher professional education

ASTRAKHAN STATE UNIVERSITY

Department of Economic Theory

COURSE WORK

Market mechanism and market equilibrium

(in the discipline "Microeconomics")

COMPLETED:

1st year student

Faculty of World Economy and Management

SCIENTIFIC ADVISER:

ass. Morozova N.O.

Kazan 2010

Introduction

Chapter 1. Market Equilibrium

1.1 Equilibrium price and equilibrium quantity

Existence and uniqueness of market equilibrium

Balance stability

Equilibrium models according to L. Walras and A. Marshall

1.5 Causes and mechanisms of market equilibrium shifts

Spider model

1.7 Equilibrium in the instant, short and long run

Conclusion

List of used literature

Introduction

The purpose of the work: to characterize market elements and study the mechanism for establishing market equilibrium.

In accordance with the goal, it is necessary to solve the following tasks:

define the concept of the market;

determine market demand and supply;

determine the equilibrium price and equilibrium quantity;

establish the causes and mechanisms of market equilibrium shifts;

consider models of market equilibrium;

consider the equilibrium in the instantaneous, short, long periods.

The structure of the work: this work consists of an introduction, two chapters, a conclusion, a list of references containing 30 sources.

The first chapter is devoted to the concept of the market and its elements - market demand and supply. The second chapter is devoted to market equilibrium, its properties, models of its establishment.

Equilibrium models are used to study the relationship between economic agents. These models are a special case of a more general class of models of interaction between economic agents. By means of equilibrium models, both the equilibrium and non-equilibrium position of the economic system are studied. In microeconomic theory, market equilibrium models are of particular importance because economic agents can effectively carry out their economic activities only if they have reliable information about all prices for both the resources they consume and the benefits offered to them. Since each individual economic agent cannot have such information, the best way to study pricing factors may be to assume an equilibrium position and minor changes in one particular price.

The Swiss economist Léon Marie Esprit Walras (1834-1910) was the first to undertake the construction of a general equilibrium model. L. Walras used the theory of groping to prove the achievement of equilibrium. The predecessor of L. Walras in the construction of the general equilibrium model was the representative of the French school of economists and engineers A.-N. Isnar (1749-1803). The main work of A.-N.Isnar is “A Treatise on Wealth”, published in 1781. The work of A.-N. Isnar influenced L. Walras, much in common was revealed in the work of both, including the commonality of analytical tools up to the use by both of them of one of the entire set of goods as a countable goods - numeraire.

In turn, the interaction between supply and demand was considered by the English economist Alfred Marshall (1842-1924), his concept of market equilibrium was called "A. Marshall's compromise". A. Marshall introduced the concept of elasticity of demand, which characterizes the quantitative dependence of demand on three factors: marginal utility, market price and money income used for consumption. From the analysis of demand, A. Marshall moved on to the analysis of the supply of goods and the interaction between supply and demand when setting prices. He determined the dependence of the influence of supply and demand on the price of the time factor. At the same time, he proceeded from the fact that in the short term, the main price-forming factor is demand, and in the long term, supply.

Later in the 30s. the first rigorous proof of the existence of general equilibrium was carried out by the German mathematician and statistician A. Wald (1902-1950). Subsequently, this proof was improved by K. Arrow and J. Debre. They found that there is only one state of general equilibrium with non-negative prices and quantities if two conditions are met: 1) there is constant or decreasing returns to scale; 2) for any good, there is one or more other goods that are in a substitution relationship.

This topic is relevant even today, since economists often face the problems that are considered in it. Understanding market equilibrium and the market mechanism as a whole makes it possible to correctly assess the situation in a competitive market.

In the next two chapters, the market equilibrium and the mechanism for its establishment will be considered in detail.

Market equilibrium

1. The concept of market equilibrium and equilibrium price

Market equilibrium is a situation in the market when demand (D) and supply (S) are in equilibrium, which is characterized by equilibrium price (P e) and 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. 1).

Above, supply and demand were considered separately. Now we have to combine these two sides of the market. The interaction of supply and demand generates equilibrium price and equilibrium volume or market equilibrium.

In other words, market equilibrium is the situation in the market at which the demand for a product is equal to its supply.

Let's combine the supply and demand lines on the same chart Fig.2.1. It is beneficial for both the buyer and the seller to trade only in the area below the demand curve but above the supply curve. This zone demonstrates all possible exchange situations in this market. This is the market for both sellers and buyers at the same time. Any point belonging to this space can express a transaction of purchase and sale. Moreover, all points, except for one, in this zone characterize non-optimal exchange conditions, that is, such conditions that are more beneficial for one of the parties to the trade transaction. And only point E, which lies at the intersection of supply and demand, illustrates a situation that is most beneficial for both the seller and the buyer at the same time. This point E at the intersection of supply and demand is called the equilibrium point. Point P E - the price at which supply and demand are in equilibrium as a result of market competitive forces. Point Q E - the value of the commodity mass, at which supply and demand are in equilibrium as a result of market competitive forces.

Fig. 2.1. Market equilibrium 1

Let us consider the equilibrium price and equilibrium volume in more detail.

The equilibrium price is the single price at which the equilibrium quantity of a commodity is bought and sold.

Rice. 1. Market equilibrium

But the state of equilibrium in the market is unstable, because changes in market demand and market supply cause a change 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. there is an excess of goods (DQ S). Oversupply always works in the direction of lowering the price. sellers will seek 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. 1, a).

If the real market price (P 1) is below the equilibrium price P e , then the volume of demand (Q D) exceeds the volume of supply Q S , there is a shortage of goods (DQ D). The scarcity of a good tends to increase its price. In this situation, buyers are willing to pay a higher price for the product. The pressure from the demand side will continue until equilibrium is established, i.e. until the deficit becomes zero (DQ D =0).

The law of diminishing marginal utility (successive increase in the consumed good leads to a decrease in utility from it) explains the negative slope of the demand curve (D). That is, each consumer, in accordance with the decreasing utility of the goods, buys more of it only if the price decreases.

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

The demand price for a good (P D) is determined by the marginal utility of each unit of the good, and the market price of a good is determined by the interaction of demand (D) and supply (S). As a result of this interaction, the product is sold at a market price (P e) (Fig. .2).

Rice. .2. consumer and producer surplus

Therefore, the consumer wins by buying the product cheaper than he could pay for it. This gain is equal to the area of ​​the shaded triangle P D EP e (Fig. 2).

Knowing the marginal cost (MC) allows you to determine the gain of the producer. 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. 2). Any excess of the market price of a unit of output over its MC will mean an increase in the firm's profit. Thus, the producer's gain is the excess of the selling price (market price) over the marginal cost of production. The firm receives such a surplus from each sold unit of goods at a market price (P e) exceeding the marginal cost (MC) of producing this unit. Thus, by selling the volume of goods (Q e) (with different MS for each unit of output from 0 to Q E) for P E, the firm will receive a gain equal to the shaded area P e EP S .

2. Equilibrium price and equilibrium volume

The equilibrium price is one of the mechanisms for establishing market equilibrium. The equilibrium price is the price at which the volume of demand is equal to the volume of supply, in other words, this is the only price that meets the condition:

P E = P D = P S

At a given price, the equilibrium quantity of goods offered on the market is also established on the market: Q E = Q D = Q S

The equilibrium price performs the most important functions:

informational - its value serves as a guideline for all market entities;

normalizing - it normalizes the distribution of goods, giving a signal to the consumer about whether a given product is available to him and how much supply of a product he can count on at a given level of income. At the same time, it affects the producer, showing whether he can recoup his costs or whether he should refrain from production. Thus, the producer's demand for resources is normalized; Market equilibrium Sustainability equilibrium Models equilibrium... shifts market equilibrium; consider models market equilibrium; consider equilibrium V...

• Market equilibrium and its characteristics. Equilibrium price, its change and consequences for the market

  Abstract >> Economic theory

  Price and deficit expectations of agents market economy. Market equilibrium- situation in the market when... market the price rises 3. Conclusion. In conditions market equilibrium both the buyer and the seller benefit, i.e. market equilibrium ...

This graph expresses the simultaneous behavior of supply and demand for a particular product and shows at what point the two lines intersect (E). At this point, equilibrium is reached. The coordinates of point E are the equilibrium price Р~ and the equilibrium volume. Point E characterizes the equality 0E = 08 = 0о, where 08 is the supply volume; 0B - volume of demand.

The equilibrium point shows that here supply and demand, being opposing market forces, are balanced. The equilibrium price means that as many goods are produced as required by buyers. Such an equilibrium is an expression of the maximum efficiency of a market economy, because in a state of equilibrium the market is balanced. Neither the seller nor the buyer has internal motivations to violate it. Conversely, at any other price different from the equilibrium price, the market is not balanced and buyers and sellers tend to change the situation in the market.

Thus, the equilibrium price is the price that balances supply and demand as a result of competitive forces.

If the real price is greater than the equilibrium price (Р()), then the volume of demand at such a price of 0 will be less than the supply of 02. In this case, producers will prefer to lower the price rather than continue to produce products in a volume that significantly exceeds the volume of demand. Excess supply (02 - 0,) will put downward pressure on the price.

If the real price on the market is below the equilibrium price (P2), then the volume of demand will be equal to 03, the product will become scarce. Some buyers will choose to pay a higher price. As a result, excess demand (04 - 03) will put pressure on the price.

This process will continue until the equilibrium level PE is established, at which the volume of demand and supply are equal. We owe the first formulation of general economic equilibrium to L. Walras (1874), who, unlike K. Marx, who proposed the category of average price (price of production), tried to abstract from the social system of production and relied on utility as the initial category. A. Marshall made an attempt to combine the theory of marginal utility with the theory of supply and demand and the theory of production costs. He holds the lead in the study of the categories "demand price" and "supply price", which is a further development of the theory of labor value. According to A. Marshall, the demand price is the price at which each individual portion of the product is able to attract a buyer over a certain period. At the same time, this is the maximum price for which buyers agree to buy a product or service. Above its market price can not rise, because consumers do not have money to buy. The offer price is the price at which the product goes on sale in a competitive market, or it is the maximum minimum price at which producers are willing to sell their products or services. The market price cannot fall below the offer price, because then production and sales become unprofitable.

Equilibrium is called stable if the deviation from it is accompanied by a return to the original state. Otherwise, there is an unstable equilibrium.

Consider first a stable equilibrium. There are two main approaches to the analysis of establishing an equilibrium price: L. Walras and A. Marshall. The main thing in the approach of L. Walras is the difference in the volume of demand 02 - 0, at the price P, (Fig. 5.7 a), as a result of the competition of buyers, the price rises until the excess disappears. In the case of an excess supply (at the price A), the competition of sellers leads to the disappearance of the excess.

a) according to L. Walras

b) according to A. Marshall

Rice. 5.7. Equilibrium price formation concepts

The main thing in the approach of A. Marshall is the price difference Px - P2. It proceeds from the fact that sellers primarily react to the difference between the demand price and the offer price. An increase (decrease) in the volume of supply reduces this difference and thereby contributes to the achievement of an equilibrium price (Fig. 5.7 6). A short period is better characterized by the model of L. Walras, a long one - by the model of A. Marshall.

The market spontaneously, automatically contributes to the formation of equilibrium prices (A. Smith called this process the “invisible hand” mechanism). The excess of the demand price over the supply price contributes to the redistribution of resources in favor of industries with high effective demand. High prices testify to the relative scarcity of goods, prompting them to expand their production and thereby better satisfy social needs. Since the equilibrium price significantly exceeds the costs of those industries whose costs are below average, it contributes to the redistribution of resources from the worst to the best producers, increasing the efficiency of the national economy as a whole.

The equilibrium situation, from the point of view of temporal characteristics, is characterized by a web-like model (Fig. 5.8), i.e. the time between a change in price and the associated change in the scale of production.

Several options are possible:

1. The slope of the supply curve is the same as the slope of the demand curve.

On fig. 5.8 a 7) 7) "shows the prices at which various quantities of goods were sold during the period /. 55" shows the quantity of goods available in the period (x and sold at different prices during the period 7) 7) "- curve, displays -

price movement, 55 "- a curve showing changes in the volume of output. In the period, the quantity of goods 01 was offered at a relatively low price Ru

This low price stimulates the production in period /2 of a relatively small amount of goods, which subsequently corresponds to a price P2 higher than Py.

The price of P2 induces the production of more goods 03, which corresponds to the already lower price of Ru. This process is repeated from one period to another. Production and prices pass through the stages () 2P2 () yPy This situation characterizes the case when equilibrium will never be reached. There are constant price fluctuations relative to the equilibrium price.

2. The slope of the supply curve is steeper than the demand curve.

Figure 5.8 b shows that under these conditions the situation becomes more and more unstable. The price drops so low that production stops or does not rise.

Widening price fluctuations occur: from one period to the next, prices move further and further away from the equilibrium price.

3. The slope of the supply curve is less than the slope of the demand curve.

In this case, as shown in Fig. 5.8V, and output,

and the price is getting closer and closer to the equilibrium level. There is a narrowing price fluctuation.

The cobweb model can be applied with a sufficient degree of accuracy only to certain products, since it does not take into account a number of important factors (for example, the influence of climatic conditions, changes in consumer demand, etc.). However, it has certain merits, as it shows the dependence of the functioning of the market on the response time in the supply sphere and the shape of the supply and demand curve. Achieving a stable equilibrium does not mean a stop in the development of production, so the stability of the market equilibrium is relative. The growth of incomes of buyers, the development of their needs will lead to a change in the volume of demand at the same prices. An increase in demand with a constant supply causes a shift of the entire demand curve to the right upwards, then a new higher equilibrium price level and a new larger volume of sales of goods are established (Fig. 5.9).

Conversely, a decrease in demand, when the entire curve (£>, £,) shifts downwards to the left with an unchanged supply, leads to the establishment of a lower equilibrium price level (P,) and a lower level of sales of goods (0,).

Rice. 5.9. Changing market equilibrium depending on the nature of demand

With a changing supply and a constant demand, a different level of market equilibrium will also be established. So, the growth of labor productivity, the reduction in production costs at the same prices will stimulate an increase in output - the position of the supply curve will change, which will shift to the right down (Fig. 5.10). As a result, the position of the equilibrium point will also change, and the equilibrium price will be set at a lower level (P,). Conversely, a decrease in supply - a shift of the curve to the left - will set a higher equilibrium price (P2) and fewer sales of the good (02).

Based on this analysis, four rules of supply and demand can be established.

An increase in demand causes an increase in both the equilibrium price and the equilibrium quantity of the good.

A decrease in demand leads to a fall in the equilibrium price and the equilibrium quantity of the good.

An increase in the supply of a good leads to a decrease in the equilibrium price and an increase in the equilibrium quantity of the good.

A decrease in supply leads to an increase in the equilibrium price and a decrease in the equilibrium quantity of the good.

In the theory of market equilibrium, the element of time is of great importance:

instantaneous equilibrium, when the supply is unchanged (Fig. 5.11);

short-term equilibrium, when supply grows without an increase in equipment (Fig. 5.12);

long-term “normal price” equilibrium, when producers replace and increase equipment, and the number of producers themselves can change due to their free entry and exit from the industry (Fig.

In the three spilled types of equilibrium, depending on the availability of time for commodity producers, they can:

or no action is taken at all; or variable factors of production will be adapted to changed conditions;

or all the factors of production will be adjusted to the changed price.

This situation of long-term equilibrium or "normal price" held high for a long time stimulates the adjustment of economic conditions to the corresponding level of demand.

The existence of equilibrium in the market is possible if there are one or more non-negative prices at which the volumes of demand and supply are equal and non-negative. Consider two situations where the supply and demand lines do not have common points, and equilibrium exists.

On fig. 5.14 the volume of supply exceeds the volume of demand at any non-negative price. For example, atmospheric air is available in such quantities that our needs are fully satisfied at zero price, i.e. for free. Therefore, equilibrium exists at zero price if, at this price, the quantity supplied (0,) exceeds the quantity demanded (02). If the air is purified, it will no longer be a free good and, obviously, you will have to pay for its consumption.

On fig. 5.15 The offer price exceeds the demand price for any non-negative number of sales of goods. The amount of money that consumers are willing to pay for a given product is insufficient to compensate for the costs of its production and sale. Then production is not economically feasible, although it is technologically possible. For example, you can make a car out of gold, but it will be extremely difficult to sell it. Here, equilibrium exists at zero equilibrium volume (0) if the supply price (P,) is greater than the demand price (P2). The bid price refers to the maximum price a buyer is willing to pay for a given quantity of a good. The bid price is the minimum price at which sellers are willing to sell a certain quantity of goods.

So far, we have considered situations in the market when equilibrium exists with a single combination of price and volume values. But a situation is possible when the supply and demand lines have two common points (Fig. 5.16).

Rice. 5.15 Fig. 5.16

In this case, the supply line changes the "sign" of the slope with rising prices, while the demand line has a "normal" form - a characteristic negative slope. This leads to the existence of two equilibrium positions at the points E] and Et. Such a supply curve is possible in the labor market. It has a positive slope at a relatively low level of wages. In other words, an increase in wages stimulates an increase in the supply of labor, but up to a certain point (point). Then the workers prefer free time to higher income, the supply of labor is reduced.

A situation is also possible in the market when the supply and demand lines have a common segment (Fig. 5.17 and 5.18).

On fig. 5.17 the lines of supply and demand coincide on the segment E [E2. In this case, equilibrium in the market is achieved at any price in the range from P] to P2 and the equilibrium volume 0E.

A change in price in this range does not cause a change in the volume of demand for consumers, and a change in the volume of supply for producers.

On fig. 5.18 supply and demand lines also have a common segment. Here, equilibrium is possible for any volume of the number of sales in the interval from 01 to (? 2 and the equilibrium price PE A change in the quantity of products sold in this interval does not cause a change in the demand price and the supply price equal to it.

It is important to emphasize that the equilibrium price is set in competitive market conditions. However, it is impossible to meet all the conditions of competition. The mechanism of market price equilibrium is the mechanism of approaching perfection, which is never fully achieved.

And yet, in practice, according to the law of equilibrium of supply and demand, the price of any product is formed. All commodity markets are close to competitive equilibrium, if there are no elements of monopoly intervention in the market mechanism that change the model of competitive equilibrium.

Monopoly intervention is intervention in the market mechanism of competitive equilibrium of individuals, commodity producers, trade unions, various associations and the state, which are able to change the price of equilibrium. Administrative intervention in the mechanism of supply and demand, even with good intentions (for example, in order to achieve fairness in the distribution of income or to achieve another social goal), as a rule, is ineffective. This goal can be successfully achieved by imposing taxes without affecting the mechanism of price formation.

Taxation can affect: the price equilibrium mechanism; state of elasticity; volume of production of goods; the level of income in society and the distribution of these incomes between producers and consumers of taxed goods. The impact of product taxation on the price of its market equilibrium can be depicted graphically (Figure 5.19).

the body of taxed products. As a result of the introduction of the tax, the supply curve moved to a new level of 5252 and, intersecting with the demand curve OB9, formed a new market price equilibrium point (R,). Taxation did not prevent the operation of the market mechanism of price formation, but it led to two results: an increase in price and a decrease in the volume of production from 02 to (?,.

The arrows on the corresponding axes show how and how much the price and quantity of goods have changed due to the introduction of the tax. If the demand line were inelastic and flat compared to the supply curve, then the burden of the tax would fall mainly on the shoulders of consumers. Thus, the tax affects the price and volume of production and leads to the establishment of market equilibrium at a new point.

Another example of state intervention in the economy and its market mechanism is the setting of prices by law (Fig. 5.20).

On fig. 5.20 shows the mechanism and consequences of forced price fixing by the state. Such intervention looks like a fair distribution of income in favor of the poor. However, from the point of view of economic theory, such a distribution is completely irrational, because it is not an effective means of either equalizing incomes or increasing the production of missing goods. It is easier and cheaper to solve these problems with the help of the market mechanism of supply and demand, which objectively stimulates the proportions of distribution necessary for society through the equilibrium price.

On fig. 5.20 the level of the established price is shown by the line AB. At price P1, the demand curves W) and supply 515 do not intersect. Consumers would buy more of the product than is offered. There is a deficit. If it weren't for the low-price enforcement, buyers might prefer to pay a higher price than go without the product. This makes it possible for speculative prices to appear on the shadow market in a deficit economy. This system cannot be maintained for a long time (being a forced measure), since it does not eliminate the main cause of the shortage - the insufficient production of the goods needed by the consumer, because the low state price cannot force the producer not only to increase, but even to continue the production of this product. The rationing system will shift the curve to the line I, indicated by the dotted line on the chart, but will not change the situation on the market, the deficit will continue. If there were no set limit, then the price would rise to point E (equilibrium), which would be inaccessible to many, but would serve as an impetus for expanding production and filling the market with goods, lowering prices to a level at which supply and demand are balanced.

And the last. Can a situation arise when the supply and demand curves do not intersect? Russian reality provides many examples of this kind. Rising prices in Russia are accompanied not only by a decrease in demand, but also by a reduction in supply. The situation in which the supply of goods with an increase in prices does not grow, but falls, looks like this on the chart (Fig. 5.21).

The graph shows that the equilibrium point has disappeared. The sale of goods did not take place. Payments have stopped. A paradox arose that was not foreseen by the traditional methods of economic theory.

This situation is explained by a number of the following reasons: the rupture of existing economic ties, the emergence of uncertainty and unpredictability in the economy;

lack of immediate adaptation of production to the changed market conditions; there is a certain gap between price increases and supply expansion, especially in capital-intensive industries;

and most importantly, the absence of a competitive environment in the economy.

The actual picture of the Russian economy shows the enormous scale, complex and multi-level nature of its monopolization. Three levels can be distinguished: monopolization of property (general nationalization), monopoly of management and technological monopoly. To this today we can add the collusion of sellers in the consumer market and the monopolization of regional areas. The liberalization of prices in these conditions leads to their inevitable growth and reduction in supply. Academician L.I. Abalkin called non-intersecting supply and demand curves a kind of “anti-monopoly effect” of the Russian economy.

So, it is precisely competition that is the powerful force that economically compels all commodity owners to manufacture, sell and buy goods at an equilibrium price and achieve equilibrium in the market.

The conditions for the formation of equilibrium in the market in economic literature are studied both at the level of microeconomics, in relation to a separate economic unit in a separate market, which characterizes partial equilibrium (A. Marshall, D. Hicks), and at the macro level, in relation to the economic system as a whole (model general equilibrium of L. Walras, V. Pareto, J. von Hayman, V. Leontiev).

At whatever stage of historical development human society is, in order to live, people must have food, clothing, housing and other material benefits. Man's means of subsistence must be produced. Their production takes place during the production process.

Production is the process of human impact on the substance of nature in order to create material goods and services necessary for the development of society. Historically, it has gone a long way of development from the manufacture of the simplest products to the production of the most complex technical systems, flexible reconfigurable complexes, and computers. In the process of production, not only the method and type of production of goods and services changes, but the moral perfection of the person himself takes place. In any society, production ultimately serves the satisfaction of 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 activity. It is they who predetermine the direction of development of production.

Initially, in a primitive society, almost all human 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 in the development of human society and production, intellectual needs appear, the volume grows and the structure of consumption becomes more complicated, and the standard of living of people rises. Under the conditions of perfect highly developed industrial production, humanity has got the opportunity to satisfy to a large extent all the existing types of needs: material, spiritual and social. Improving the life of the population is manifested, first of all, in a more complete satisfaction of material needs in food, clothing and footwear, housing, working conditions and other vital benefits.

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 goods. The market functioning process includes many barter transactions, each of which involves a buyer, represented by a demand for goods and services, and a seller, on whose side the offer and services are.

As a result of the interaction of supply and demand, a market price is established, which is fixed at the point at which the demand curves D and supply 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.

At the same time, 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 will decrease or with a constant demand, supply will increase.

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

Market equilibrium- the situation on the market when demand (D) and supply (S) are in equilibrium, which is characterized by equilibrium price (P e) and 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 is the price at which the equilibrium quantity of a good is sold and bought.

Rice. 2. Market equilibrium

But the state of equilibrium in the market is unstable, because changes in market demand and market supply cause a change 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 excess goods(DQS). Oversupply always works in the direction of lowering the price. sellers will seek 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) is below the equilibrium price P e , then the volume of demand (Q D) exceeds the volume of supply Q S , there is shortage of goods(DQD). The scarcity of a good tends to increase its price. In this situation, buyers are willing to pay a higher price for the product. The pressure from the demand side will continue until equilibrium is established, i.e. until the deficit becomes zero (DQ D =0).

The law of diminishing marginal utility (successive increase in the consumed good leads to a decrease in utility from it) explains the negative slope of the demand curve (D). That is, each consumer, in accordance with the decreasing utility of the goods, buys more of it only if the price decreases.

Demand curve can be used to determine gain (surplus) of the consumer - 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 good (P D) is determined by the marginal utility of each unit of the good, and the market price of a good 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 the 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 the marginal cost (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 output over its MC will mean an increase in the firm's profit. Thus, manufacturer's gain is the excess of the selling price (market price) over the marginal cost of production. The firm receives such a surplus from each sold unit of goods at a market price (P e) exceeding the marginal cost (MC) of producing this unit. Thus, by selling the volume of goods (Q e) (with different MS for each unit of output from 0 to Q E) for P E, the firm will receive a gain equal to the shaded area P e EP S .

Market equilibrium - 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 - the price at which the quantity demanded in the market is equal to the quantity supplied. On a supply and demand graph, it is determined at the point of intersection of the demand curve and the supply curve.

Equilibrium quantity - the volume of supply and demand for a product at an equilibrium price.

Equilibrium is stable and unstable.

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

If, after an imbalance, a new equilibrium is established and the price level and the volume of supply and demand change, then the equilibrium is called unstable.

Types of sustainability:

1. Absolute;

2. Relative;

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

4. Global (Set for any fluctuations).

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

Models of macroeconomic equilibrium 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 whole society was François Quesnay (16941774)- the head of the school of physiocrats. In his Economic Table, he gave a description of the general picture of simple reproduction. Dividing 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 incomes arise, how costs are reimbursed (for equipment, land improvement, rental payment, seeds). F. Quesnay was mistaken in believing that a 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 the national economic balance.

An important place in the analysis of social reproduction was given to the provisions of the theory of Jean Baptiste Say (1767-1832), a French economist who widely promoted the ideas of A. Smith in France. He is known for his Say's law, which he proposed in 1803. According to this law, real aggregate demand is able to automatically absorb the entire volume of output produced in society with the available technology and resources. In other words, supply creates its own demand. According to Say's position, goods are created only in order to receive some benefit with the proceeds. The produced volume of products automatically provides income equal to the cost of all created goods, sufficient for their full implementation. As a result, the economic system is automatically maintained in a state of equilibrium.

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

The positions 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 proved mathematically. The model of L. Walras 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 Walrasian model is theoretical in nature and shows the ideal economic system. The main role in the Walrasian system is played by equilibrium prices, i.e. prices that ensure the equality of supply and demand for each product. Thus, his model, being macroeconomic in form, is based on microeconomic indicators. In the final form, the system of equations of L. Walras is written as follows:

m

Σ Pi Xi = ΣVj Yj ,

i=1 j=1

where: Р i prices of final goods and services i of that type;

Xi quantity of goods and services i of that type;

Vj are the prices of production resources of the jth kind;

Yj is the amount of production resources of the jth kind.

This formula reads as follows: the total supply of final products in monetary terms should 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 the cost-output chessboard. 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 put into practice 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 CSB. However, in world economic thought, this model is associated with the name of Wassily 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 scheme 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 production of industry i must be spent to produce a unit of production of industry j .

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

X \u003d AX + Y, where X \u003d (X 1, X2 .... X n) - the volume of production of any industry; Y \u003d (Y1, Y2, .... Y 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 for the sectors of the economy necessary for its production. 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 types of equilibrium: sectoral, intersectoral, general. To trace how the growth of production of any industry causes the growth of other industries.

The problem of social reproduction occupies a very important place in the theory of K. Marx (18181883). In the third volume of his main work, Capital, schemes of simple and extended social reproduction are presented. They reflect the processes of exchange between subdivisions I and II of social production (the production of means of production and the production of consumer goods). Conclusions about the conditions for the implementation of the total social product are formulated. V.I.Lenin (18701924) developed the theory of reproduction of K.Marx. After analyzing the schemes for the realization of a social product in the conditions of technical progress (with an increase in the organic composition of capital), he concluded that the law of preferential growth in the production of means of production works.

2 EQUILIBRIUM PRICE

The free movement of price in accordance with changes in supply and demand causes goods sold in the market to be distributed according to 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 the supply is greater than the demand, then in a perfectly competitive market, the price will decrease until all the goods offered find their buyers.

Equilibrium price - 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 offer. The equilibrium price is:

- the price at which supply and demand are equal;

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

- a price that does not show an upward or downward trend.

Neither sellers nor buyers have incentives to change the situation on the market in case of equilibrium, that is, there is a balance. In the case of formation of any other price, different from the equilibrium one, sellers and buyers receive an effective incentive to transform their position in the market.

The equilibrium price according to Marshall 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 offer price in the case of an equilibrium volume of demand and supply.

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

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

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

Equilibrium price functions:

1. Distribution;

2. Information;

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 the intervention of the state, which willfully sets prices above or below the equilibrium point. In such cases, one speaks of "floor" and "ceiling" prices. The ceiling price limits the price increase in an upward price movement – ​​this is an artificially low price. The price of the floor does not allow the price to fall beyond this limit - this is an artificially high price. Therefore, on the chart, the floor price will be set above the equilibrium point, and the ceiling price will be lower.

Ceiling prices are lower than the equilibrium price and prevent the market price from rising to the equilibrium level. Reduced prices are usually set as a result of the policy of states aimed at "freezing" prices, i.e., fixing them at a certain level in order to stop inflation and prevent a decline in living standards. The shortage of goods, which arises as a result of lower prices compared to the equilibrium level, is usually solved with the help of demand rationing through the introduction of normalized distribution.

TESTS

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

a) a price increase

b) decrease in income;

c) income growth;

d) price reduction;

e) cheaper substitute goods.

4. The reason for the fall in the price of goods may be:

a) an increase in taxes on private enterprise;

b) growth of consumer incomes;

c) a fall in the price of inputs;

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

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

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

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

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

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

d) the demand for the good has increased.

CONCLUSION

Thus, market equilibrium is a state of the economy in which the quantity of the requested product at a given price for it is equal to the quantity of the given product 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 area. In real life, transactions for the purchase and sale of goods can be carried out at any price, limited by the demand price from above and the offer price from below. The actual transaction price will depend on many additional factors:

- from the balance of forces (when it comes to the dominance of sellers on 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 prices can be set in any range);

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

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