Demand of the individual consumer. Law of demand.

Offer of an individual enterprise. Law of supply.

Equilibrium of supply and demand. The equilibrium price.

Elasticity of supply and demand.

Price: concept and essence. Classification of price.

 

Behavior of the main subjects of the market economy (buyers and sellers) reflect the main elements of the market mechanism: demand and supply. The process of interaction between buyers and sellers is carried out in the market.

► The market is a mechanism that reveals the interaction of buyers (demand bearers) and sellers (suppliers) of individual goods and services.

Through the system of interaction between supply and demand, the mechanism for the formation and functioning of a market economy is realized.

 

1. Demand of the individual consumer.Law of demand

The concept of demand

Demand as an economic category reflects the needs of people. It is needs people, their desire to create more comfortable living conditions and find its reflection in this category. And it should be noted that the needs of individuals are very diverse. This is due to personal personal preferences, tastes and, finally, traditions.

► Payable demand is the desire and the corresponding opportunity of consumer to purchase a particular product at a certain point in time.

• The amount of demand is the amount of goods (products) that consumers are willing to purchase at an appropriate price in a certain period of time.

 

Law of demand

- decreasing in the prices of the corresponding goods increases the demand for them, and an increasing in prices reduces demand for these goods.

• Law of demand expresses an inverse relationship between the price of the commodity and the amount demand for it.

The objective prerequisites for the emergence of the law of demand should be attributed the following provisions:

1. Consumers are willing to buy more of the product, but at a lower price.

2. Consumers purchase additional quantities of the product only on condition that its price is reduced.

3. The law of demand can be explained by the effects of income and substitution.

The effect of income is that if the price of the goods is done, then at the same income the consumer can buy more goods, that is, the consumer's demand is growing. Higher price leads to the opposite result.

The effect of substitution is expressed by the fact that, given its low price, the consumer has an incentive to buy cheap goods instead of similar goods, which now relatively more expensive. Consumers tend to replace expensive products cheaper.

 

Demand curve

The inverse relationship between the price of a product and the amount of demand can be represented in the form of graph that showing the demand value on the horizontal axis, and the price on the vertical axis.

Graph 6.1 - Individual demand curve

Law of demand says that the consumer is willing to buy more products at a lower price than at a higher price. This is reflected in the demand curve (Graph 6.1).

Law of demand does not apply in the following cases:

a) in case of shortage of goods;

b) in respect of expensive goods, the purchase of which is a means of saving;

c) in respect of goods of prestigious demand non-price factors of demand.

There are many other factors affecting the amount of demand. These include non-price demand factors (Table 6.1).

 

Table 6.1 - Non-price factors of demand

 

Factors	Content
Consumer preferences	If the goods become fashionable, then the demand for it grows, and vice versa.
Changes in consumer income	The increase in consumer income leads to an increase in demand for goods. For example, an increase in the wages of workers in the budgetary sphere or the sphere of material production (the real sector of the economy).
Number of buyers on the market	Increase in the number of buyers the market tends to raise demand and reduction - reducing of demand. In fact, it is a direct link.
Prices for conjugate goods	When two products are interchangeable, there is a direct relationship between the price of one product and the demand for another.
Buyers expectations of price changes	The possible increase in prices for certain goods in the future prompts consumers to buy more goods to prevent this increase. Equally, the expectation of an increase in revenues can help reduce the restrictions on current expenses. Conversely, the expectation of a fall in prices and a decrease in revenues leads to a reduction in current demand for goods.

Graph6.2 - Changes in demand

demand increase demand decrease

Thus, non-price factors cause changes in demand, which graphically reflects the demand curve (Figure 2).

 

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