The law of supply and demand, the equilibrium price

Demand is the solvent demand of the buyer. It expresses itself in the amount of money that a person is ready and can pay for products. And depends on a number of factors: tastes, preferences of buyers, their incomes.

In the economy there is such a thing as the "law of demand". He explains why the price of the product has a big impact on sales . So, the higher the cost, the fewer purchases, and vice versa. In addition, the law of demand expresses the inevitable decline in the need of people in a particular commodity.

So, the quantity of goods and services bought depends primarily on the price. Consider the situation when the market lacks any products. In this case, the growth of their value is inevitable, since a deficit has arisen. As soon as a large number of these goods enter the market, prices will immediately react with a decrease.

The law of demand also shows such a process as a gradual decline in sales. This is due to saturation of consumers. Each subsequent purchase of this product brings less benefit to a person. For example, you can take a child and sweets. The kid at first with the big pleasure eats sweets, but gradually he ceases to test pleasure from them. Saturation has occurred. So it is in the consumer market: people "gorge on" the goods and do not feel a great need for it. The supplier, in order to keep demand, begins to reduce the cost of the product, but this process can not continue indefinitely. Buyers are first ready to take on new units of the product, as the price satisfies them. But in the end, low cost will stop attracting people.

The law of demand is an economic concept, it establishes the relationship between demand and supply. Graphically, the first is denoted by a curve that has a negative slope. This is due to the fact that it shows an inverse relationship between variables - sales volume and price. And also the diminishing marginal utility of each subsequent purchase of goods. Demand curve is denoted by DD, in translation from English - "need", "need".

What is the supply of goods? This is the volume of the product that is on the market. This indicator is directly dependent on price. That is, if the value of the goods is reduced, less and less sellers are willing to sell their goods. As soon as the price starts to grow, the entrepreneur is making ever larger deliveries to the market. The supply curve has a positive slope. It is designated SS, from English it is translated as "delivery on the market", "supply". The supply curve reflects the graphically direct dependence of the volume of supplied goods on the price.

The volume of the proposed product depends not only on the price, but also on a number of other factors: the availability of analogues, taxes and subsidies, marketing, advertising, production technology, raw material quality, etc.

Once the supply and demand curves are arranged at different slopes, they must intersect at a certain point. It is called the "equilibrium price". That is, at a given cost, the volume of the purchased goods will be equal to the volume of supplies to the market.

Thus, the law of supply and demand governs the pricing process. The equilibrium price is established under the influence of specific features and trends in the market. We get one more of the basic economic concepts. The equilibrium price is the cost at which for each product on the market there is neither a deficit nor a surplus. At the same time, supply and demand are balanced by the influence of competition in the market. The point of intersection of the curves is denoted by the letter E. Market equilibrium should always be considered only with respect to a certain time interval.

So, we examined important economic concepts, such as the "law of supply and demand", "equilibrium price," and their graphic designation.