Екзаменаційний білет №1

THE DEFINITION OF DEMAND. THE ROLE OF DEMAND IN ECONOMICS

In economics, supply and demand describes market relations between prospective sellers and buyers (consumers) of a good. The supply and demand model determines price and quantity sold in a market.

Demand refers to how much (quantity) of a product or service is desired by buyers. The quantity demanded is the amount of a product people are willing to buy at a certain price. Supply represents how much the market can offer, i.e. the amount of goods that are provided for consumers to buy. The law of demand states that, if all other factors remain equal, the higher the price of a good, the less people will demand that good. In other Words, the higher the price, the lower the quantity demanded. So if the price is too high the demand falls. Shops are full of goods but many people cannot afford to buy them. Producers and sellers become overstocked, some goods get spoiled, others have to be sold at reduced prices. This happens when supply exceeds demand.

When goods are scarce and some of them are even not available, the demand grows, but prices grow as well. Again people don't buy either because they cannot afford skyrocketing prices or, even if they have money, there is nothing to buy. In this situation demand exceeds supply.

Екзаменаційний білет №2

THE DEFINITION OF SUPPLY. THE ROLE OF SUPPLY IN ECONOMICS

In economics, supply and demand describes market relations between prospective sellers and buyers (consumers) of a good. The supply and demand model determines price and quantity sold in a market.

Like the law of demand, the law of supply demonstrates the quantities that will be sold at a certain price. But due to it the higher the price, the higher the quantity supplied. Producers supply more at a higher price because selling a higher quantity at higher price increases.

When supply and demand are equal the economy is said to be at equilibrium. At this point, the allocation of goods is at its most efficient because the amount of goods being supplied is exactly the same as the amount of goods being demanded. Thus, everyone (individuals, firms, or countries) is satisfied with the current economic condition. At the given price, suppliers are selling all the goods that they have produced and consumers are getting all the goods that they are demanding.

A very important concept in understanding supply and demand theory is elasticity. In this context, it refers to how supply and demand to various factors. Often, it is useful to know how the quantity demanded or supplied will change when the price changes. This is known as the price elasticity of demand and the price elasticity of supply. Elasticity in relation to variables other than price can also be considered. One of the most common to consider is income.

The right proportions between supply and demand, prices, range and quality of goods offered, competition, purchasing power of our salaries or wages are strictly connected with sound economic conditions in the country. Demand and supply have also been generalized to explain macroeconomic variables in a market economy, including the quantity of total output and the general price level.