Areas of economic activity. concept market equilibrium, equilibrium price and volume.

Changes in equilibrium states of the market. Methods for analyzing these changes.

Basic models of market equilibrium.

1 .The most important goal of market research is to identify the price and volume that satisfy both the buyer and the seller at the same time. Let's combine supply and demand models to answer the question.

The demand curve divides the market space into 2 areas, indicating the maximum level of possible market prices.

The supply schedule also divides the market space into 2 areas, indicating the minimum level of market prices.

Combining the two charts reveals 4 areas in the market space:

Dead zone of the market space: no buying or selling;

High price zone: possible sales, but not possible purchases (interests of the seller);

Low price zone: possible purchases, but not possible sales (buyer's interests);

Zone of possible purchases and possible sales.

These are areas of various equilibrium states of the market, some of which are stable, while others are not, depending on the amount of information that the buyer or seller owns.

Equilibrium is said to be stable if, at any deviation from the initial equilibrium price, the market again tends to the previous state.

The initial market equilibrium model has the form:

E: Qd=Qs=Qe; Pd=Ps=Qe;

Market equilibrium is a state in which:

The amount of demand is equal to the amount of supply and an equilibrium volume is formed;

The demand price is equal to the offer price and an equilibrium price is established;

Neither the buyer nor the seller has an incentive to change the volume of purchases and sales;

When P1-Qs>Qd;

For P2 – Qd2 > Qs2;

At any market price that deviates from the equilibrium, non-equilibrium market states are possible, the whole variety of which is reduced to 2 states of disequilibrium. At a high price of P1, there is an excess of supply - overproduction, at a low price of P2, there is an excess of demand - a shortage.

The situation of excess activates the activity of the seller (sales, discounts, technologies);

And the situation with the deficit activates the activity of the buyer (queues, appeal to resellers, expansion of the shadow market);

2 . Market equilibrium changes under the influence of both supply and demand factors. Consider the impact of non-price factors of demand:

So, under the influence of non-price factors of demand, the equilibrium changes in the same direction as the demand itself: demand has increased - and the equilibrium has also increased.

Consider the influence of non-price supply factors.

Conclusion: So, under the influence of non-price supply factors, the equilibrium volume changes in the same direction, and the price in the opposite direction relative to the change in the supply itself.

With the simultaneous influence of non-price factors of supply and demand, the situation requires a special specific analysis, in which conclusions can be different both in relation to prices and volumes.

There are 2 methods for studying changes in market equilibrium:

Static method;

dynamics method;

1) The method of statics focuses on the previous and current market equilibria, determining the price-volume combination in each specific situation, but the process of change and the time of such a change are not taken into account;

We do not pay attention to the time between E0 and E1 and what was the path. We consider the moment at each given moment and take into account the direction of change.

2) The method of dynamics in the analysis of changes in equilibrium states draws attention to the process of transition from one equilibrium to another, as well as to the duration of this process in time.

With this method, the following dynamic models are possible:

A) damped model;

B) Indifferent model;

B) Propagating model;

A) The damping model says that the wide amplitude of price changes at first, when approaching a new equilibrium, attenuates and decreases. One of the conditions for this version of dynamic models is the unequal awareness of the buyer and seller about prices in this market. Typical for developed market economies.

B) An indifferent model develops in the market if, when the market equilibrium changes, the same amplitude of price deviations remains until the onset of a new equilibrium.

C) The spreading model depicts a situation where minor price deviations at the beginning only increase over time. It is typical for countries with unfinished market structures (transitional economy);

In reality, any seller can counteract market instability by:

First: additional marketing research of the market;

Secondly: creating the necessary reserves for their use at the right time;

3 . There are 3 basic models of market equilibrium used to explain market changes in different markets and at different times:

1) Spider web model;

2) Walrass model;

3) Marshal model;

1) The web model most satisfactorily explains markets with a long production cycle (agricultural markets, construction markets), when the buyer and seller have different price information. A buyer who focuses his market behavior on the current price has more up-to-date information. The seller, on the other hand, focuses on the price of the previous period, because he does not have more reliable information due to the ongoing production cycle. This model is a special case of the damped model.

The main condition for constructing this model is the difference in the slope coefficients when constructing supply and demand curves. The slope of the supply curve is:

The slope of the demand curve is

>

The buyer is more flexible, because has more information

P1 - high price of the previous period;

P2 - the real price at which the buyer will purchase;

2) The Walrasian model is used to explain market equilibrium in the short run. The peculiarity of the model is that both the buyer and the seller play an active role in it at the same time. The role of the buyer is enhanced in conditions of excess demand and competition among buyers. The role of the seller is enhanced in conditions of oversupply and competition among sellers. Competition among buyers is the force in the market that causes the market price to rise, and competition among sellers causes the market price to fall.

=

3) The Marshall model is used to explain market equilibrium in the long run. In this model, an active role belongs to the seller, the supplier of products. At the same time, the seller is focused on the ratio of bid and offer prices. If the demand price is greater than the offer price, then the seller increases the supply of goods to the market, and if the offer price is greater than the demand price, then the supply decreases until it reaches an equilibrium volume in this market.

Q 1 → Pd > Ps, supply increase;

Q 2 → Ps > Pd, supply reduction.

Market equilibrium - the state of the market when demand and supply are equal fire. Market equilibrium:

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

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

Market equilibrium

Market equilibrium is the 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.: NORMA Publishing House, 2003, p. 48. On the supply and demand graph, it is determined at the point of intersection of the demand curve and the supply curve.

Equilibrium volume (equilibrium quantity)- the volume of supply and demand for goods at an equilibrium price.

The Mechanism for Achieving Market Equilibrium

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.

Types of market equilibrium

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).

The equilibrium price functions are as follows:

1. Distribution;

2. Information;

3. Stimulating;

4. Balancing.

Equilibrium in the goods market

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

In the market for a good, the 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 when all sellers and buyers can buy or sell the amount of the good that they want to buy or sell.

Equilibrium in the market is a situation when sellers offer for sale exactly the amount of a 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, for market equilibrium it is necessary that a price be established at which supply and demand will coincide. In other words, the price equalizes the volumes of supply and demand.

The price that causes the volumes of demand and supply 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.

Under equilibrium conditions, the so-called clearing of the market occurs = there will be no unsold good or unsatisfied demand on the market (buyers who want to buy the good at the established price and who are 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 have produced as buyers want to carry away. Such a price is called the equilibrium price, and the volume of supply and demand corresponding to it = the equilibrium volumes of supply and demand.

How to define balance?

To do this, you need to use the supply and demand functions and determine at what value of the price 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 at which the supply and demand curves intersect is called the equilibrium point.

Rice. 1. Balance point

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

Can the curves not intersect?

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

Rice. 2. Situations when there is no equilibrium in the market.

In principle, such a situation is possible. We can imagine the existence of two cases where the supply curve is entirely 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 high labor intensity (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 "above" the demand curve for these goods (Fig. 2. a). This means that market equilibrium occurs at zero values ​​of price and quantity = that is, the market for such goods simply does not exist.

In another case, the production of goods may not require high costs, but the benefits themselves may be completely useless to consumers. For example, handleless tablespoons are cheap to produce = but who wants 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 “snuggle up” to it so much that there are 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 start trading only at that price?

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

Let us assume that there were no transactions at all in the market, and that sellers and buyers do not know each other's desires and possibilities. Thus, we must determine how equilibrium is established in the new market.

In such a new market, trial transactions are first made, as a result of which the first buyers somehow negotiate with individual sellers about the price and acquire the good. There is some variation in prices. Since the market is perfect (according to our assumption), each subsequent buyer and each seller knows at what prices deals have already been made, and are guided by the most profitable ones. Buyers will seek to buy at the lowest price and will go to those sellers who offer such a price. Sellers will try 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 selling out too quickly and they will soon be out of stock, they will gradually raise the price. If they see that the goods will not sell, they will gradually reduce the price.

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

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

In everything next days sellers and buyers will know at what prices deals were made earlier, and starting the trading day, they will focus on "yesterday's" price. The new price will be adjusted during the trading process.

Market equilibrium- a state that is characterized by a balance and proportionality of interrelated economic processes (for example,), and the absence of economic agents and markets in general of incentives to change the existing situation.

Market balance (market equilibrium) - adequate to market laws the ratio of supply and demand; the correspondence between the volume and structure of demand for goods and the volume and structure of their supply.

Since market equilibrium is such a state of the market, which is characterized by the equality of supply and demand for all goods and services, in this sense, a synonym for the term "equilibrium" is "balance". Prices and volumes of goods at which market equilibrium is observed are respectively called equilibrium prices and equilibrium volumes: equilibrium volume - the volume of demand and supply of goods at an equilibrium price; in turn, the equilibrium price is the price at which the volume of demand in the market is equal to the volume of supply.

In theory, they consider partial equilibrium - in a given market at given prices for all other goods - and general equilibrium - the study of prices and quantities of all goods and services within an economic system.

The process of automatic return of the system to a state of equilibrium was called by L. Walras (1834-1910), who developed the theory of general equilibrium (the term "equilibrium" is taken from physics), "groping" (French tatonnement), that is, a search without a specific chosen direction (in in economics it is called the Walrasian process). According to Walras' law, the total quantity demanded under the appropriate price system must be equal to the total quantity supplied. The price at which the market is in stable equilibrium is called the equilibrium price. If any deviation from equilibrium prices creates forces that tend to move prices away from equilibrium, an unstable equilibrium may arise. There are also cases of non-equilibrium and "non-unique equilibrium".

The mechanism for achieving market equilibrium is that the free movement of price in accordance with changes in supply and demand leads to the fact that goods sold on 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 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.

Stable market equilibrium- equality of volumes of supply and demand in conditions under which the deviation of the price from its equilibrium value is accompanied by such a reaction of participants in market transactions that returns the price to the equilibrium value.

Unstable market equilibrium- equality of volumes of demand and supply in conditions under which the deviation of the price from its equilibrium value is accompanied by such a reaction of participants in market transactions that does not return the price to the equilibrium value. In this case, a new equilibrium is established and the price level changes, as well as the volume of supply and demand.

Equilibrium stability - the ability of the market to come to a state of equilibrium by establishing the previous equilibrium price and equilibrium volume. There are the following types of sustainability:

1. absolute;
2. relative;
3. local (price fluctuations occur, but within certain limits);
4. global (set for any fluctuations).

Stable (stable) market equilibrium can be in conditions when the forces acting on the market in different directions are mutually balanced. But since the conditions are constantly changing, the market equilibrium remains largely a theoretical abstraction, unattainable in practice in full, and even more so for a relatively long time.

Distinguish between general market equilibrium and different kinds(levels) of private market equilibrium in individual sectors and market segments. For example, the market equilibrium of the investment market, on the one hand, and the market for individual goods and services (markets for oil, cars, travel packages, vacancies, loans, debts, etc.) on the other. The connection between them is unconditional: private equilibrium in some cases can be achieved even in the absence of a general market equilibrium in the economy. However, as a rule, prices, supply and demand for each commodity depend on the totality of prices, demand and supply for all goods and, therefore, a general equilibrium can exist only when it turns out to be a "structural" market equilibrium.

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: instant, 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 (long-term), in which all factors of production are considered like variables. Accordingly, these periods distinguish instantaneous, short-term and long-term equilibrium.

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.

a) instant period

b) short (short-term) period

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 capacity.

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.

a) at constant cost

b) at increasing costs

c) at decreasing costs

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.

Economic theory: lecture notes Dushenkina Elena Alekseevna

5. Market equilibrium

5. Market equilibrium

Supply and demand scales show us how many goods buyers could buy and sellers could offer at different prices. Prices by themselves cannot tell us at what price a sale will actually occur. However, the intersection of these two curves is very importance in economics. The interaction of supply and demand will eventually lead to the establishment of an equilibrium, or market, price. The market price is exactly the price at which demand equals supply and a good or service can actually be exchanged for money.

The market price cannot fall below the offer price, as production and marketing become unprofitable. The price cannot be higher than the demand price because the buyer does not have more money to purchase. If the interests of the producer and the buyer coincide, then a market equilibrium is established.

Combine the scale of supply and demand into one table.

Only at a price of 100 rubles will there be neither shortage nor excess, i.e., the magnitude of demand will coincide with the magnitude of supply.

Graphically, the market equilibrium can be depicted as follows (Fig. 6):

Rice. 6. Market equilibrium

Point E is the equilibrium price formed at the intersection of the supply and demand curves.

Balancing price function- the ability of the competitive forces of supply and demand to set the price at a level at which the decisions to sell and buy are synchronized.

The equilibrium price model depicted above is static.

IN real life the market price cannot remain unchanged for a long time, therefore, a dynamic model is characteristic of market equilibrium.

Such models in the XIX century. were proposed by L. Walras and A. Marshall.

1. The essence of the model of L. Walras is that the search for market equilibrium occurs in the short term: producers reduce output, and buyers show the same amount of demand. Buyers begin to compete, which leads to an increase in prices. The output of goods is stimulated, and the deficit disappears.

2. Model A. Marshall describes the market equilibrium in the long run, i.e., the volume of supply is able to respond to a high demand market price. Thus, there is an analysis of the state of shortage of goods. The interaction of supply and demand in the market leads to the establishment of market equilibrium, which allows you to determine the equilibrium price and the equilibrium quantity of goods.

When demand or supply changes, or both, the market (equilibrium) price changes simultaneously.

The intervention of external forces (the state and monopolies can act as such) leads to a violation of the established state of economic equilibrium:

1) the approval by the state of a “ceiling” of the price (below the equilibrium price) leads to the formation of a persistent shortage of goods or services, which the state cannot eliminate, since the price below the equilibrium price does not interest producers to increase production (see Fig. 6);

2) the setting by the state (monopoly) of a price higher than the equilibrium one leads to the formation of a surplus of goods (overstocking), which the state has to purchase with taxpayers' money (Fig. 6).

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