The free market is able to achieve a balance between supply and demand on its own without significant government or other external intervention. This state is calle market equilibrium.
Market equilibrium is when the quantity of goods that consumers want to buy is equal to the quantity that producers are willing to produce and sell at a given price. The price at this point is calld the equilibrium price, and the quantity is calld the equilibrium quantity.
As an example, we can consider the apple market
If the equilibrium price is 150 rubles per kilogram, then office 365 database sellers are ready to sell exactly 10 tons of apples at this price, and buyers are ready to buy exactly this volume. On the graph, this is the intersection point of the supply and demand curves:
The equilibrium of supply and demand plays an important role in the economy, as it regulates the functioning of the market – it allows achieving a situation without excess and deficit of products. If the cost is higher than the equilibrium, supply exceeds demand. If the price is lower than the equilibrium, consumer demand exceeds the possibilities of implementation, a deficit is formed.
All about elasticity of demand, supply: basic concepts, formulas, definitions
The law of supply and demand does not always apply. Sometimes seeing medina on stage was the cherry on the cake price fluctuations do not cause changes in the quantity purchased. The degree to which demand responds to such changes is calld elasticity.
Elasticity shows how much the quantity of purchases (demand) changes as a percentage when some factor, such as price, buyers’ income, or the cost of similar goods, changes by 1%.
In other words, elasticity of demand can demonstrate how responsive demand is to changes in the describd parameters. It is common to distinguish three main types of elasticity of demand.
1) Elastic demand (πΈπ>1).
A 1% change in the price of a product leads to a change cyprus business directory in demand for the product by more than 1%. This type of demand is usually typical for equipment, clothing, and luxury goods. That is, consumers are extremely sensitive to price changes. If it falls, this is immdiately reflectd in an increase in demand. If it rises, people immdiately reuce consumption.