Market mechanizm
Market from the economical point view it's a from of making contact between buyers and sellers to set up the transaction (deal).
elements of the market - it's a relation between demand and supply coordinated by a price. Between the elements of the market there are causality - result relations called market mechanism.
Supply and dement create subject called deliver aon reciver. A deliver doesn't have to be a producer manufacture of the goods. The resiver doesn't have to be a consumer Subject at the market make their own decisions at their own risk and in the name of success.
Price is the basic element of the market making the balance between the supply and dement (price of single commodity)
*...... is a cost of a single item
*relative price - a cost of a single item commpared with the price of other goods or services.
The change of the price gives us the information on with base participants (members) of the market make a decision on resources allocation.
Price funcions:
1. Informative
Give information to the consumer and producers on actual deal conditions. The most important information for the producers is...... The producer must calculate (economical calculation) where on one side he adds (sums up) input on the indywidual price of the production factors on the other hand (side) the effects of the selling acording to the given price. The price makes the input and effect of the production come together and in this way the basic of the price costumer spand their income so that they can fully sat is … their needs.
2. Balancing, distributing
Fully done at the conditions of market equilibrium. Equilibrium price is the price which makes the market "clear" at such prices there are no lack of stack or overstack. They show the current strepht of the market.
The "purifying" task causes the elemination of the faulty delivers and unpayable recevers. Prefers effective and payable market subject. The fundamental meaning of the distributing price makes the connection the production section and the consumer section. Prices influence the level of income of all the market subject.
3.Re-distributet
High price caused by taxes make other subject income lower due to the income of other subject such as the goverment. In the oposite situation low prices make the income rise with is acomponied by subvension with means that the state has to repay the input cost for the producers.
The function of demand - factors defining of demand
Demand - the number of goods in the market needed by customer at different level of prices, at stated time and on the level of the their income.
A demand curve - shows a graphical picture of the low of demand, shows a relation between the number of the goods in the market bought at stated time and the price of the goods.
Low of the demand - the higher the price of the goods the lower the demand for them which means that when the prices are increasing the demand is decresing. And when the price is lower the demand is higher.
Rang demand curve
1. If the demand is indifferent to the price charping we call the demand ...... It concers goods which stisfy basic needs and do dose substitutes such as saat, insulin, and funeral services.
2. The demand may be highly influential and than we call it cosk.
The example: if there are a lot of small enterprise on a free market whose shows of the market are so small that they can't influence or the. Due to the fact all the products are sold at the market price and the changests of the productions don't influence the market price.
3. Paradox - it's a situation in with the demend is increasing together with the price(Paradoxes it situation, incuase of demand in which for goods prestigious, consumption alleviates which veguirement of demonstration of status of mateval purchaser.)
- veblen paradox - shows the situation when some house holds valueless the goods with are bought by other households as a result they don't buy the products or only a small number of them.
- "owczy pęd" - shows the situation when some household value and buy the goods by other households
- speculation paradox - shows the increase of the demand for goods whose price is going to rise
Having of the demand curve is caused by all the factors not relate with price but causing the changes of the demand.
The demand is changing because of:
*market factors
Price level of substite and complementary goods, the income of the carisumers, consumers expectation towerds price changes and their future income.
*out of market factor
Indywidual consumer's preferences, tastes, fashion, weather conditional, seasons, demographic factors, political situation economical
Coriplementary good - this is the situation in with owning goods couse the demand for other
Substitute good - is it a situation in with one product has pot similar feature as another and satisfy similar needs. Then two products are substitute products and if the price of one product rise the demand for the other rises as well.
Function of supply. The factors define supply.
Supply – it is amount good which is offer to sale on specific time, by given level of price.
Supply curve – it illustrates graphically dependence between amount on sale offered good but given price.
Supply right / Low of supply – during appreciation in prices of amount given good, offered grows on sale and vice versa – offer of sale falls off during decvease of price.
3.2 Supply curve
Supply just demand is changes inflienced by many factors it is possible to include: manufacturing costs, prices of relational goods, expectations concerning future price, natural subsidies number of branch enterprise.
Market balance means, that quantity which customers want to buy scroop is equal quantity, which vendor want to sell.
Price of market balance it is price where need is leveled with amount offered on market.
Amount of commodity balancing market is size of describing balance market, widness of supply is equal widness of demand.
SURPLUS AND DEFICIENTY
Market surplus it situation, when supply of given commodity exceeds demand on this commodity, it perform at superior prices from price of balance.
Stockpiling of stockpile of commodity for to cut prices. Lowest price means smaller increments and limitation of production causes but and supply. It motivates lawest price simultaneously boost of shopping, that with limitation of supply including, largeness of surplus.
Market deficienty it situation in which demand exceeds supply of this commodity on given commodity on market. It takes a stand at lawest prices from price of market balance.
Adjust processes cause appreciation in prices for price level of market balance. Long price means greatest increments and boost of production causes and supply.
Maximum price – it is peak price, it is possible to agree upon which in legal transaction purchase and sale. It is established for consumer protection before overvalues (too high prices).
Floor price – bargain level it is possible to agree upon which in legal transaction purchase and sale. It established affirmation of financial viability of production as biggest number of producer.
Two substances of forming market balance:
- Substance Walras it based on price changes influenced by surplus performing or on market deficiency.
- Substance Marshall it based on alignment benefits of purchaser and vendors, influenced by difference between price of demand but price of supply.
Stability of market – it relies on ability for getting balance, if changes will follow in demand and supply.
Model of web – dynamic model, it dependence time factor takes into consideration in manual between price change and change of sized of production. Depending on degree of price bandy of demand and supply differ : suppressed….. (oscylacje) ( it take a stand when curve is characterized demand greatest degree of price elasticity than supply curve. (oscylacje wybuchowe….) (Elasticity of price supply is greatest than price elasticity of demand) oscylacje o stałej amplitudzie wahań ( supply function and demand function characterized the same value of ratio of price elasticity.)
Exercises!
3.1. Teoretical questios
1.Graphic one-way illustration dependences among price of given but this amount good offered on market is bandy(supply/demand/revenue).
2.Paradox Giffena concerns(decrease/growth)demands of goods(basic/luxury)of growth of prices.
3.Change of largeness of demand forced price changes treated good it finds mirror in(slip/traffic endwise)bandy of demand.
4.Growth rate labor for employee it will cause slip bandy of supply(in right down/in left up).
5.If two goods is goods is goods complimentary it growth in price one of they will cause(growth/decrease)demand of second good.
6.Growth demand it can be caused(growth attractive goods for consumer/decrease price substitutes).
7.Introductio prices max evakes(surplus/deficiency)market.
8.Price min is(min/max)price legal after commodity can be sold.
9.Market surplus is state in which(demand/supply)it exceeds(demand/supply),in effect of that market mechanism causes in effect to(growth/decrease)price.
10.Free market it that ,when balance it formed influenced by(games of power demand and supply administrative operator state).
3.2.Test of multiple choice
1.Law demand says:
a.if will decrease a supply,decrease a price
b.takes a stand direct dependence among price and largeness supply
c. takes a stand reverse dependence among price and largeness demand
d. takes a stand reverse dependence among price and largeness supply
2.Change supply will be cause change:
a.revenue of consument
b.technology
c.preferences of consument
d.taxes
3.If growth supply and demand ,then:
a.price balance will growth but amount balance can growth or undergo decrease or remain without changes
b. price balance will decrease but amount balance can growth or undergo decrease or remain without changes
c. amount balance can growth but price balance will growth or undergo decrease or remain without changes
d. amount balance can decrease but price balance will growth or undergo decrease or remain without changes
4.Paradox Veblena in relies on:
a.growth of demand for goods prestigious in growth of revenue consuments
b.growth request for goods prestigious in growth of price
c. growth of demand for goods prestigious for influence growth of prices their substuts
d. growth of demand for goods subordinate
5.Complimentary goods in relies on:
a.that same prices sold goods
b.implement goods in allievate concret need
c.capability of substitute one good of other in aim to allievate concret need
d.change structure of demand, in relieson for substitute relativ goods expensive in goods relative cheap
6.Surplus market it in which such situation when:
a.supply exceeds demand,prices have trend to growth
b. demand exceeds supply,prices have trend to growth
c. supply exceeds demand,prices have trend to decrease
d. supply exceeds demand,prices is not changes
7.Going up of rate taxes VAT(from value added)it will cause:
a.movement endives band of supply up
b.slip band of demand in left
c. slip band of supply in left
d. slip band of supply in right
8.Which from following goods include for compliment:
a.left glove and right glove
b.night lamp and bulb
c. cheese white and cheese yellow
d.pen and eternal pen
9.Result of research published according to which child spend time on computer fun achieve better results in science.Which of situation have influence of price,demand or supply of computers?
a.growth of demand,growth price
b.decrease of demand,growth price
c. growth of supply, growth price
d. decrease of supply, decrease price
10.When prices will growth of eternal pens?
a. decrease of supply eternal pens
b.decrease largeness of demand in eternal pens
c.growth largeness of demand in eternal pens
d.demand of ink will grove
3.3Test true or false
1.On demand have influence only price treated good and level of revenue consuments.
2.Demand is band drooping positively,but supply is band drooping negatively.
3.All goods have their substituts.
4.Growth production capacity leads to growth suppply and will mirror of slip band of demand in left.
5.Price is parameter of economic subject (producents,consuments),which influence in important manner on decision in relation to allocation of goods.
6.Price for demand commodity for given or fever is price balance of market.
7.For every price more than price of balance in market emerges surplus offered product-emerges excees market.
8.Balance of market is state always long duration.
9.If consuments non reacted on changes of prices, then demand we names perfect elastic.
10.Character of market it can result from specifity subject stand in role of vendor and purchaser and specific other circumstances whole of relation of exchange.
3.4. Tasks
- Market of certain commodity may characterized by the following function of demand and supply:
Q (d)= 925 - 10*P: Q(s)= 670 + 20 * P.
Please give equilibrium price and quantity on the market.
- Please calculate equilibrium market price and equilibrium market quantity for markets described
by following equations: Q(s)= -20 +5 *P; Q(d)= 110 - 15*P.
3. Present change of the demand and supply graphically .
a. It is known, that in the 3 months time there will be sale of out – of – season clothes, which stands over in magasins and shops.
b. Workers at the production of cars have been straiking for two months.
4. Justify, which of following goods may have demand curve with positive slope: diaments, iron, bread, soccer.
5. Let’s take it for granded, that we are considering lightning and energetic market of,, Maxmedia " company. Mark on the charts and describe in short, how described situation has infuenced the demand for decorative lamps of ,,Maxmedia" company.
6. In production plant government has increased price of a product of 15%. Producers will be selling product with a new price, and difference is carried away by Fiscal Department. Calculate new equilibrium price.
7. Shape of the demand and supply curve of a product on the market is following: P= 5* Q(s); Q(d) = 900 - P;
Where P - market price; Q(d) - demand size, Q(s) - supply size.
a. Please find equilibrium points;
b. What will be the new equilibrium price and equilibrium quantity, when the costs of goods production will increase by 300;
c. In which case the seller will get bigger absolute income?
8. Shape of the demand and supply curve is following: P= 10* Q(s); Q(d) = 20.000 - P;
a. Please find equilibrium points;
b. What will be new equilibrium price and equilibrium quantity, when the costs of goods production will increase by 10.000;
c. How much will be on absolute revenue?
9. Size of demand and supply for each good is described by the formula: Q(s) = 1500 + 4*P;
Q(d)= 2000-P
a. Calculate equilibrium price and equilibrium quantity;
b. How will equilibrium position change, if price is shaped on the level 50 pln;
c. How will equilibrium position change, if price is shaped on the level 80 pln?
10. Equation of demand and supply each good A has got the following shape: Q(d) = -2P + 60;
Q(s)= 3*P + 10
a. Calculate equilibrium price and equilibrium quantity;
b. How will change equilibrium position, if price shaped on the level 15 pln;
c. How will change equilibrium position, if price shaped on the level 8 pln;
d. The act of closing down the two enterprises, producing good A, has caused the change of demand and supply. If in that situation market can described by equation: Q(d) = -2P + 60;
Q(s)= 3*P + 5, so how much will be new equilibrium price, and how much equilibrium quantity?
3.4. Checking questions
1. What is the difference between absolute price and relative price?
2. What is about assumption ceteris probes in research of demand and supply?
3. How sounds demand and supply law?
4. What factors besides price are influencing to the change of the demand?
5. What factors besides price are influencing to the change of the supply?
6. When the price established is a price floor and when is ceiling?
7. What are the paradox Giffena, Veblena, speculative about?
8. Give reasons of arise shortage on the market.
9. What may caused surplus on the market?
10. Present tasks and function of markets mechanism.