Suggestion function. Determinants of the offer

Supply law expresses straight the relationship between the price and the value of the supply of the good for a certain period of time.

The law of supply states: as prices rise, the amount of supply increases accordingly; as prices fall, supply also decreases. The supply is influenced by both price and non-price factors.

The relationship between prices and the amount of goods that producers are willing to release and sell is called a supply curve or curve. The higher the price, the more, other things being equal, the greater the supply of goods, for the producer seeks to increase his income. However, at a very high price, a fairly large income can be obtained without increasing production. In this case, the supply may be reduced.

The supply law has two forms of expression: a) sentence scale; b) supply curve.

Suggestion scale is a tabular expression of the relationship between the market price of a good and the amount that sellers will offer at this price.

Supply curve - it is a graphical expression of the relationship between the market price of a good and the quantity that sellers will offer at that price.

The supply curve reflects the relationship between the amount of the offered good and its price. It illustrates what price must be paid for a unit of the offered good for each quantity of the good in order for this quantity of the good to be released, that is, offered to the market. For most goods, the supply curve has a "rising" and "concave" shape.

The rising supply curve expresses the essence of the law of supply, which is that for a significant amount of goods, the higher the price for them, the greater the amount of goods offered by producers in the market.

The "concavity" of the supply curve is explained as follows: with an increase in the price of a good, an increasing number of firms participate in its output, thereby causing a significant increase in the volume of the offered good. As the price of the good rises at a certain stage, the market will be oversaturated with it and the expansion of the output of the good will stop; as a result, the volume of output of goods stabilizes regardless of the price level. If the price continues to rise, the supply curve will become vertical.

SUPPLY FACTOR - an increase in the available amount of a resource, an increase in its quality or an expansion of technical knowledge, technological capabilities, innovations that create the possibility of producing a larger volume of goods and services, contributing to an increase in their supply.

Price factor - the change in the value of supply is influenced by the change in the price of this good in the market. (Qs) = f (P), where Qs is the total volume of the supply; P is the price per unit of the given good on the market.

Factors affecting supply (non-price)
1. Prices of factors (resources) of production
2. Production technology
3. Price and scarcity expectations of manufacturers
4. Amount of taxes and subsidies
5. Number of manufacturers

OFFER FUNCTION-dependence between the amount of proposed goods and his at a cost and others factors affecting the volume suggestions are accepted as permanent. Often the term “ scale suggestions".

The supply function S (p) describes the relationship between the market price of a product and its supply in an isolated market for this product. In the general case, it should be assumed that the product under consideration is produced at a sufficiently large number of competing enterprises. In such a situation, it is natural to assume that each manufacturer strives for the greatest profit, and his individual output of a product increases as the price of that product rises. But then the total supply of goods on the market S (p), as the sum of individual outputs, is an increasing function of price, i.e. S ′ (p)> 0.

9) The interaction of supply and demand. Walras and Marshall models: content and comparative characteristics. Equilibrium price and equilibrium volume.

INTERACTION OF DEMAND AND SUPPLY - a process that generates the formation of a market price that satisfies both the seller and the buyer.

The market price reflects a situation when the plans of buyers and sellers in the market completely coincide, and the volume of goods that buyers intend to buy is absolutely equal to the volume of goods that producers intend to offer. As a result, an equilibrium price arises, that is, a price of such a level when the volume of supply is equal to the volume of demand.

In a market equilibrium of supply and demand, there are no factors to either increase or decrease prices as long as all other conditions remain equal.

Rice. Interaction of supply and demand

2.1.2. Suggestion: concept, indicators, function. Supply law

Offer (S): the desire of producers to sell a certain amount of a product at a certain price for a certain time.

Characteristics of the offer:

1. Amount of supply: Qs is the amount of goods that sellers are willing to sell at a certain price within a certain time.

2. Price: Ps - the minimum price at which sellers are willing to sell a certain amount of goods.

There is a relationship between (1) and (2), which is reflected in the law of supply.

The law of supply - it is a direct relationship between the price of a product and the value of the supply of this product.

The graphical form of expression of the law of supply is the supply curve.

Supply curve- since the seller is the recipient of the payment, then the higher the price, the more revenue, the amount of profit depends on the price. Low prices may not cover production costs. Therefore, if prices fall, then this leads to a reduction in the market supply of goods and vice versa.

The offer function can be specified:

The graph is the supply curve. It shows how many goods (Qs) producers are willing to sell at each price level in a specific period of time.

Table;

A mathematical formula.

The graph has a positive slope.

Mathematical formula:

Pa - the price of goods A

Ps Pz - prices for complementary and interchangeable goods

L - prices for production resources;

N - taxes and subsidies;

T - the nature of the technology used.

At Pa = const - non-price factors act.

Factors influencing the offer:

1. Price (Pa) - changes in the volume of supply and is graphically displayed by moving the points along the curve (from A to B), other conditions unchanged.

2. Non-price (valid when Pa = const):

Prices for complementary and interchangeable goods;

Production resource prices (land, labor, capital);

Taxes and subsidies;

The nature of the technologies used;

The number of sellers.

Non-price factors lead to a change in the offer itself and are graphically displayed by moving the entire supply curve.

From S to S 1 - an increase in supply.

From S to S 2 - supply decrease.

Offer- the relationship between the price of the product and the amount that sellers want and may sell.

Supply law- all other things being equal, the higher the price of a product, the greater the seller's desire to sell it.

Non-price supply factors:

resource prices

technology

number of sellers in the market

expectation of future prices

The supply law can be illustrated with a supply curve.

Supply curve reflects the positive relationship between price and quantity offered. Each dot shows the volume of the offer and the corresponding price. For example, at point E * the price P corresponds to the quantity of goods Q s.

By raising the price to P2, the manufacturer will want to sell more of the product X and will increase the supply to T.V. With a decrease in the price to P 1, the manufacturer will reduce the volume of output to point A. This movement along the supply curve is a change in the volume of supply of goods X.

Supply volume- the quantity of goods that would have been sold at a given price if all other factors affecting the offer remain unchanged.

Change in supply volume- movement from point to point along the supply curve under the influence of the price factor. Change in the quantity of a product offered for sale in response to a change in price (all other things being equal).

Changing the offer- displacement of the entire supply curve in response to the impact of non-price factors. On the graph, an increase in supply will be demonstrated by a shift in the supply curve from S to S 2 (this shift could be caused by the manufacturer's expectation of an increase in prices for goods, a decrease in resource prices, an increase in the number of sellers in the market, etc.). A shift in the supply curve from S to S 1 indicates a decrease in supply at a constant price of the product.

Suggestion function.

The supply function is the dependence of the amount of supply on the relevant factors influencing the supply. Usually the factors are reduced to a minimum, assuming that they are unchanged.

It is this empirically derived dependence that is the law of supply. At the same time, the relationship between price and quantity sold can be viewed in the opposite direction. In such a case, the same supply curve will show the minimum price at which the seller agrees to yield a given quantity of goods. This inverse relationship can be expressed as inverse sentence function: [P s = g(Q)]... This dependence is also increasing.

3. The interaction of supply and demand. Market equilibrium.

If the market is in equilibrium, the price of the good is such that the amount of the good that the buyers want and can buy exactly matches the amount of the good that the producers want and can sell.

In other words, this is a situation when the volume of demand is equal to the volume of supply at a given equilibrium price.

IN The entire market space is divided into four sectors.

Sector 1- "dead zone" (prices are higher than the maximum for the buyer and below the minimum for the seller). No one is interested in concluding deals on such conditions.

Sector 2- an area of ​​possible sales (one-sided interest of the seller), but purchases of such quantities of goods at such prices are impossible.

Sector 3- the opposite picture: only the buyer is interested in such low prices for these quantities of goods. Sale under such conditions is not possible.

Sector 4 -"Zone of coincidence of interests". Almost any point from this sector symbolizes the terms of the opportunity. T. A - "seller's market"(the buyer is at the limit of his capabilities), i.e. B - “Buyer's market”. If the balance of forces in a given market does not allow us to speak of a clear superiority of one of the parties, then the market situation can be expressed by any point lying somewhere in the middle between the supply and demand curves. The coincidence of prices and volumes of supply and demand achieved in this case can hardly be called stable, since at least one of the parties to the transaction here has an incentive to change the current situation. The situation will be stable only if the interests of the seller and the buyer completely coincide, i.e. at the equilibrium point (i.e.), at this point, the price of the good is such that the amount of the good that buyers want and can buy exactly matches the amount of the good that the producers want and can sell.

The mechanism for establishing market equilibrium.

Demand growth; [with an increase in demand, competition among buyers grows, and a deficit appears. This leads to an increase in prices and an increase in supply to a new equilibrium point)].

Falling demand;[when demand falls on the market, a trade surplus appears. This leads to a decrease in prices and a reduction in supply to a new equilibrium point)].

Supply growth; [growth in supply leads to a shift in the supply curve from S to S 1. This will lead to trade surplus and seller competition, which will result in the market price dropping to a new equilibrium].

Drop Offers;[with decreasing supply, the situation will change in the opposite direction].

Suggestion function determines the offer depending on the various factors influencing it. The most important of these is the price per unit of the good at a given moment in time. A price change means movement along the supply curve. In fact, the supply of a good is influenced not only by the prices of the good itself, but also by other factors: 1) the prices of factors of production (resources), 2) technology, 3) price and scarcity expectations of market economy agents, 4) the amount of taxes and subsidies, 5) the amount sellers, etc. The amount of supply is a function of all these factors

Qs = f (P, Pr, K, T, N, B),

where Рг - resource prices;

K - the nature of the technology used;

T - taxes and subsidies;

N is the number of sellers;

B - other factors.

Moving along the supply curve reflects change in supply: the higher the price, the higher (ceteris paribus) the value of the offer and, conversely, the lower the price, the lower the value of the offer. A shift in the supply curve to the left or right reflects change of proposal: it occurs under the influence of factors that determine the function of the proposal.

To understand the function of a sentence, the time factor is important. Usually, the shortest, short-term (short) and long-term (long) market periods are distinguished. In the shortest period, all factors of production are constant, in the short run, some factors (raw materials, labor, etc.) are variable, in the long run, all factors are variable (including production capacity, the number of firms in the industry, etc.).

INconditions of the shortest market period an increase (decrease) in demand leads to an increase (decrease) in prices, but does not affect the amount of supply. INconditionshort period an increase in demand causes not only an increase in prices, but also an increase in production, since firms have time to change some of the factors of production in accordance with demand. INconditions for a long timeth period an increase in demand leads to a significant increase in supply at constant prices or an insignificant increase in prices.

3. The balance of supply and demand and its model.

In a market economy, competitive forces contribute to the synchronization of demand and supply prices, which leads to the equality of demand and supply volumes. At the intersection of the supply and demand curves, an equilibrium volume of production and an equilibrium price are established.

Equilibrium price - the price that balances supply and demand as a result of the action of competitive forces. Equilibrium price formation is a process that requires a certain amount of time. In conditions of perfect competition, there is a rapid mutual adjustment of the prices of demand and supply prices, the volume of demand and the volume of supply. Both consumers and producers benefit from the balancing act. Since the equilibrium price is usually lower than the maximum price offered by consumers, the value surplus (yougames) of the consumer can be graphically depicted through the area limited by the maximum price and supply and demand curves to the equilibrium point. In turn, the equilibrium price is usually higher than the minimum price that the most advanced firms could offer.

If E is an equilibrium point, then the price at which goods are sold and bought is equal to P E, and the volume of goods sold is equal to Q E. Therefore, the total (total) revenue is TR = P E x Q E. The total costs (costs) of producers are equal to the area of ​​the figure OP min EQ E.

The difference between total revenue pe x Q E and total costs is the producer's surplus (gain).

Both the establishment of the exact equilibrium price and small deviations from it are possible. Market equilibrium exists where and when and where the possibilities of changing the market price or the amount of goods sold have been exhausted.

There are two main approaches to the analysis of the establishment of the equilibrium price: L. Walras and A. Marshall. The main thing in L. Walras's approach is the difference in the volume of demand (supply). If there is an excess of demand at the price P1:, then as a result of competition between buyers, the price rises until the excess disappears. In the case of an excess of supply (at a price of P 2), the competition between sellers leads to the disappearance of the excess.

The main thing in A. Marshall's approach is the price difference. Marshall assumes that sellers primarily react to the difference between the bid and ask prices. The wider this gap, the more incentives for supply growth. An increase (decrease) in the volume of supply reduces this difference and thereby contributes to the achievement of an equilibrium price. The short period is better characterized by the model of L. Walras, the long one - by the model of A. Marshall.

The simplest dynamic model showing damped fluctuations, as a result of which equilibrium is formed in an industry with a fixed production cycle (for example, in agriculture). When manufacturers, having made a decision on production based on the prices that existed in the previous year. They can no longer change its volume.

Equilibrium in the cobweb model depends on the slopes of the demand curve and the supply curve. Equilibrium is stable if the slope of supply S is steeper than the demand curve D. If the slope of the demand curve D is steeper than the slope of the supply curve S, then the fluctuations are explosive and equilibrium does not occur. If the slopes of the supply and demand curves are equal, then in this case the price makes regular oscillatory movements around equilibrium.

In the modern market, there is a concept opposite to demand - this is supply. Experts understand this term as the willingness of the seller to immediately sell his product. The suppliers of products to the market are mainly manufacturers. Their activity on the formation of prices and the sale of goods is determined by some goals, the main of them is getting the maximum profit. The main function of the bid price is to ensure that they are achieved.

The essence of the proposal

Each commodity producer strives to produce a commodity, the need for which is felt by society at the moment, that is, it is based on consumer demand. Thus, all producers in the market contribute to the satisfaction of social needs by forming a so-called supply. This is the seller's ability and desire to put on the market a certain amount of goods at a given time. Such a possibility is limited by the volume of production resources, therefore it is unable to satisfy the needs of the whole society at once.

The volume of supply is determined by the volume of production, but is not equal to it. The difference between these values ​​is explained by the internal consumption of products, losses during storage and transportation, etc.

Supply law

The quantity of goods entering the market and its value are united by a direct or positive relationship. The formulation of this relationship is as follows: with equal market characteristics, an increase in the purchase price of a product contributes to an increase in supply, just as its decrease causes a decrease in production volumes. This specific dependence is the main market law.

You can clearly depict the action of such a law in reality in three ways: graphical, analytical or tabular.

Let's consider the first option. Plotting conditional supply values ​​on the horizontal axis and prices on the vertical axis on the chart and connecting them, we will see that the resulting line has a positive slope. Simply put, as the price rises, the number of goods on the market increases, and vice versa. This graph serves as direct evidence of the market law formulated above, defined by such a concept as the supply function.

Determinants of the offer

The main factors that can regulate the amount of supply are the following non-price determinants:

1. The price of the resources required for production. The more expensive the raw materials used, the higher the production costs and, accordingly, the lower the profit and the desire of the manufacturer to produce this product. Thus, the supply function and its volume directly depend on the prices of factors of production (their increase leads to a decrease in its volumes and, as a result, to a decrease in supply).
2. Technology level. The use of modern production technologies, as a rule, helps to reduce costs and is accompanied by an increase in the volume of goods offered.
3. The goals of the firm. If the main task of the enterprise is to make a profit, then its activities are aimed at increasing the rate of production. If the goal is, for example, its environmental friendliness, production capacity drops.
4. Taxes and subsidies. Tax increases increase costs, while government subsidies, on the contrary, stimulate producers to increase supply.
5. Changes in prices for other goods. For example, a change in oil prices (in particular, an increase) contributes to a change in the cost of charcoal, in this case upward.
6. Manufacturers' expectations. Constant monitoring of the market sometimes influences the behavior of producers, for example, expected inflation contributes to a decrease in production. Likewise, the planned increase in prices affects the change in supply, only in the opposite direction.
7. The number of producers of homogeneous goods can also be attributed to factors influencing the supply. The more there are, the correspondingly, the higher the volume of goods offered in this market.

Suggestion function

This function is the dependence of the volume of goods entering the market on the factors that determine it. In a broad sense, all types of supply functions are the organization of direct interaction between the production of goods and their consumption, as well as their purchase and sale.

The emerging market demand for a product causes an increase in its production and an improvement in quality, which leads to an increase in the total amount of this product on the market.

Supply curve

The supply curve (or supply function) is a way of graphically depicting the amount of goods offered in a given market for each price value, while other factors remain unchanged. As a rule, this curve is increasing.

To build a graph, you need to draw a line in the coordinate system, connecting the points of intersection of the supply and demand lines.

The location and slope of the curve on the graph depend mainly on the size of production costs, since no enterprise will work if the profit from the sale of the product does not cover the cost of its release.

Supply curve shifts

An increase in supply contributes to an increase in production volumes, and a decrease - to a decrease. This dependence is reflected in the schedule of the graft of the proposal: in the first case, it shifts to the right and down, in the second - to the left and up.

The supply function of a product, as well as its curve, imply the use of two different terms, such as "supply value" and "supply" itself. The first term is used when it comes to changes in the volume of goods supplied to the market due to fluctuations in their prices. If the change in production is caused by other factors, use the second term.

Also, a shift in the supply curve occurs when the amount of production costs varies: when it grows, the line shifts up by the amount of the difference, and vice versa - when it decreases.

Similar metamorphoses will be noted on the graph in the case of tax increases / decreases, due to their direct relationship to production costs.

Interaction of supply and demand

The retail price of a product on the market, as well as the volume of its production and sales, is determined by the interaction of supply and demand. It is this interaction that determines the supply and demand functions.

If the price of a product falls below average, the market responds with an increase in consumer demand. Manufacturers, in turn, reduce the volume of production of this product, since its production has become less profitable. Thus, buyers are ready to buy a product, but manufacturers are unable to meet their growing demand for it.

The opposite occurs when prices rise: manufacturers want to release as much expensive product as possible on the shelves, but buyers do not want to purchase it at such a high price.

Equilibrium price

Equilibrium is the price at which the quantity of goods produced fully satisfies the consumer need for it, that is, the amount of demand is equal to the amount of supply. This volume of production is the equilibrium for the given market.

If the current price of a product differs from the one mentioned above, then the activities of sellers and buyers contribute to its achievement. This is explained by the fact that only such a value of the goods ensures the satisfaction of the current needs of society (and this, as we have already noted, is the main function of the supply) and maintenance of the optimal level of production costs.