The economy of supply is ... Supply and demand in the economy

Economics is a science that studies commodity-money relations in a society. Thanks to it, we can buy the goods we need, use services, make profit and invest in infrastructure development. The main "whales" on which all this complex mechanism is held are supply and demand. In the economy, with special attention, their ratio and the size of existing proportions are analyzed.

What is a proposal?

The answer to this question is not difficult to find, just look in the specialized literature. It states that the supply economy is a process that provides for the entrepreneurs to supply their goods to the market. Their number directly depends on the ability and desire of businessmen to do their work, as well as on the availability of consumers who are not against buying this or that thing. And the price for the offered goods is strictly determined by the laws of the market economy, the presence of competitors, the level of GDP in a particular country, adopted by state acts, and other factors.

The supply depends on the size of production and the technologies involved. This in the economy is very important, because these two components characterize the entrepreneur's ability to work. It is also necessary that the businessman not only could, but also wanted to produce goods. Thus, he must have an aspiration, namely permission to sell at a specific price, as well as the possibility - the availability of the necessary resources and capital to start production.

Supply and demand

They are closely related. If the offer is in the economy, the totality of goods, called the market fund and released in great demand to consumers, then demand is the desire of the buyers themselves to purchase this item. The ratio of the two components strongly affects the change in the proportions of production, the movement of labor between the branches, the attraction of capital and its distribution. When demand exceeds supply, the cost of goods and services increases, and businessmen get good dividends. To meet the needs of people, they increase production: as a result, demand is met.

If the offer is dominant, then entrepreneurs suffer losses: people are not interested in purchasing goods, while competition in this case is often large, prices are rapidly falling. Despite this, the proposal always generates demand. Their harmonious correlation is the guarantee of an effective economy, a normal standard of living in the country. The greater the demand, the higher the price. But entrepreneurs are not interested in too high a cost: it is easier for them to keep it at a normal level, but at the same time to expand production and, at the expense of this, to get a big profit.

Theory of Supply Economics

It was developed by those economists who actively studied the demand and supply in the economy. Representatives of the theory are Arthur Laffer, Martin Feldstein, George Gilder. The very same term "supply economy" was introduced by the American Herbert Stein. In the opinion of these scientists, in order to improve production in the state, one must pay attention to the aggregate supply, while ignoring the demand. After all, stimulating growth of the latter does not guarantee good long-term results.

The theory of the supply economy bears the basic idea: it is necessary to maximally stimulate the factors that influence the mass production of the goods. Its representatives call it the main motivator of the growth and prosperity of the economy. Their conclusions are based on the law of the markets of the French specialist Jean-Baptiste Say. According to his statements, the main thing is the production of goods, and the purchasing power always arises in the process of output on the market. Opponents of the theory of supply - adherents of the Keynesian hypothesis - on the contrary, exalt demand and recommend encouraging it.

Main types of offers

Demand and supply in the economy are always guided by the desire and possibilities of a simple buyer. They can be measured both on a narrower scale and on a larger scale. Depending on this, two types of offer are distinguished:

• Individual. This is the product of one particular seller, firm, organization.
• General. It implies the totality of all goods of a particular sector of the economy, issued by all businessmen without exception, engaged in core business.

It can be argued that these two species are always subject to the rule formulated by economists. The so-called law of the sentence says: as the value of the commodity increases, its supply also increases. Thus it is necessary to remember about resources: if their use has reached the maximum peak, the price increase can not increase the offer, and with it production. Businessmen need to pay a lot of attention to the purchase of materials, their proper distribution and the most economical use.

Price Factors

In order for firms or organizations to produce goods freely and in large volumes, several factors must be taken into account that directly affect production proportionately. First, it is the very cost of things. The higher it is, the less you need to sell. A small percentage of people are able to pay a tidy sum for the purchase, so the offer should not be large. Simultaneously, the low cost of the goods makes it possible to purchase it for virtually every person. Therefore, the production in this case should be increased.

Secondly, the cost of resources also takes into account the supply economy. This means the following: the more expensive they are, the more the price of the goods increases - accordingly, the sales volume must be lowered. Despite this, the proposal will always remain flexible. If the incomes of the population are growing rapidly, the standard of living in the state rises, then even at a high price for the product itself or the material from which it is made, production can be increased. And experienced businessmen do this gradually, focusing on the demand of the population.

The main non-price factors

First of all, they include technology of production and all the same resources. After all, these two factors are decisive in the economy. For example, technology. The degree of its development invariably raises the level of the return of resources - that is, one more material can receive more products. For example, the consequence of the active introduction of the production line is a higher output of the necessary products per employee. It turns out that with the increase in the level of technology, the quantity of goods also grows. The proposal is also increasing. However, this factor has almost no effect on those things that are produced manually.

As for resources, their deficit also forms a size. The economy of supply is also provided. Rare materials can not serve as the basis for a large number of goods. The businessman buys such materials at a high price: in the end, it raises the cost of the product itself. In this case, the offer should not be high, otherwise material investments in the goods will not pay off because of low sales.

Value of taxes and producers

They also strongly influence the supply in a market economy. It is clear that the profit of the entrepreneur depends on the amount of taxes. In addition, in order to compensate losses from extortion, a businessman is forced to raise the value of the goods - this factor is most significant for those products that are taxed too much. For example, alcohol and tobacco products - to reduce their consumption and save the health of citizens, or fur coats - to prevent the extermination of rare animals.

The supply economy is also an orientation toward the number of producers. The higher it is, the higher the supply will grow. In this situation it is necessary to take into account the resources of resources: they will rapidly decline. Businessmen will start using more expensive materials, since cheap ones are quickly bought up by competitors. Or import them from abroad, which will also increase costs. Such products will be unprofitable to sell at the previous price, so the proposal will not increase.

Other non-price factors

The proposal also varies depending on the expectations of citizens regarding future prices, possible raw materials, tax rates. For example, farmers can temporarily stop selling potatoes, expecting that its value will soon grow significantly. The opposite effect is also possible: manufacturers will increase their turnover, predicting an increase in the price of products. This factor is difficult to calculate, so it is rarely taken into account in the economic model.

Important and the cost of other goods, as well as the supply of money. In the economy, this means that entrepreneurs are in constant search of the most profitable sphere for investment. With an increase in the price of this or that product, it becomes attractive for investment - there is an inflow of capital. It turns out that this non-price factor is also very important: if the cost increases, there is an outflow of money into the sphere of production, the supply of a particular product is significantly reduced. All this must be taken into account so that the economy in the country flourishes, and supply and demand harmoniously complement each other.