Supply and Demand. Спрос и предложение.
Demand - an economic principle that describes a consumer's desire and willingness to pay a price for a specific good or service. The price of a good or service increases as its demand increases and vice versa (law of demand) => demand curves slope downward. Demand curve is a graphical representation of the demand schedule. It shows how much of a good or service consumers want to buy at any given price. The quantity demanded is the actual amount consumers are willing to buy at some specific price. Movement along the demand curve is a change in the quantity demanded of a good that is the result of a change in that good’s price. Shift of the demand curve shows the change in the quantity demanded at any given price. Factors that shift the demand curve: 1) Changes in the prices of related goods. A pair of goods are substitutes if a fall in the price of one good makes consumers less willing to consume the other good Two goods are complements if a fall in the price of one good makes people more willing to buy the other good. 2) Changes in income. When a rise in income increases the demand for a good—the good is a normal good, otherwise it is an inferior good. 3) Changes in tastes. Because people have different tastes, changes in the distribution of income between individuals can lead to shifts in demand between goods. 4) Changes in expectations. For example, expected changes in future income can lead to changes in demand today.
Supply. The quantity supplied is the amount of a good or service people are willing to sell at some specific price .Supply curve shows graphically how much of a good or service people are willing to sell at any given price. Movement along the supply curve is a change in the quantity supplied of a good that is the result of a change in that good’s price. Shift of the supply curve is a change in the quantity supplied of a good or service at any given price. Factors that shift the supply curve: 1) Changes in input prices. An increase in the price of an input makes the production of the final good more costly for those who produce and sell the good, so supply curve shifts to the left. 2) Changes in technology. When a better technology becomes available, reducing the cost of production—that is, letting a producer spend less on inputs, yet produce the same output—supply increases, and the supply curve shifts to the right. 3) Changes in the number of suppliers. Given input prices and technology, the more firms that produce a good, the greater is the supply of that good. 4) Changes in expectations. An expectation that the price of a good will be higher in the future causes supply to decrease today, but an expectation that the price of a good will be lower in the future causes supply to increase today.
Equilibrium. A competitive market is in equilibrium when price has moved to a level at which the quantity demanded of a good equals the quantity supplied of that good The price at which this takes place is the equilibrium price or market-clearing price.
There
is a surplus
of a good when the quantity supplied exceeds the quantity demanded.
Surpluses occur when the price is above its equilibrium level.
Sellers who reject the lower price will fail to find buyers, and the
result of this price cutting will be to push the prevailing price
down until it reaches the equilibrium price. There is a shortage
of a good when the quantity demanded exceeds the quantity supplied.
Shortages occur when the price is below its equilibrium level.
General principle: When demand for a good decreases, the equilibrium price of the good and the equilibrium quantity both fall and vice versa. An increase in supply leads to a fall in the equilibrium price and a rise in the equilibrium quantity and vice versa. Shifts of the demand curve and the supply curve can happen simultaneously.