The elasticity of supply and demand

economic indicators such as demand, supply and price are the main elements of the market.It is their interaction and forms a market mechanism, which can be represented as the union of buyers and sellers to form a good supply and demand.

Thus, demand is determined by a certain number of products for the purchase of which each has its own specific buyer price of similar parameters for a certain period of time.The main points in this definition are: the availability of a particular price scale and a certain time period.Due to changes in the price changing demand.It is this formulation of the law and determines demand.

proposal can be presented in the form of a certain number of products, which is ready to make an economic entity for the further implementation of certain price from a specific number of prices in a certain time period.

Existing law offers is able to show a direct relationship of the price of the amended proposal.In other words, relatively high prices contributed to the fact that the ma

nufacturer More offers its products and low - on the contrary, lower.When deciding on the production of specific products, the business entity is obliged to constantly compare the price per unit to its cost.

term "elasticity of demand and supply at the price" is directly linked to the demand for certain products, depending on the level of their prices.That is why the price elasticity of demand and supply shows the degree of dependence on changes in consumer prices.To measure it using the appropriate factor.

coefficient of elasticity can show the percentage will change the magnitude of demand for the products if the price changes by 1 percent.

elasticity of supply and demand can be calculated using the following formula:

Ep = (-ΔQd (%)) / (ΔP (%)),

where Ep - elasticity of supply and demand with respect to price;

ΔQd - changes in demand or supply (relative value in percentage);

ΔP - price change (relative value in percentage).

If we imagine the relative values ​​of the corresponding formulas, the elasticity of supply and demand can be calculated as follows:

Ep = ((Q1 - Q0) / (Q1 + Q0)): ((P1 - P0) / (P1 + P0)),

where Q1, Q0 - supply or demand before and after the change in the price;

P1, P0 - price, taken before and after the change.

By increasing the prices the volume of demand is gradually reduced.To avoid negative values ​​in the above formula, the value of the coefficient needed to take the module.

When the elasticity of supply and demand, greater than one, the increase in demand and decline any offer faster rates.The value of this ratio less than one indicates inelasticity of demand, where the fall or rise of supply and demand is slower than a change in price.

factor equal to one - perfect for any economy that characterizes the overall balance of all economic processes in the country.

also in theoretical studies, there are the concept of "absolute inelasticity" (if the change in price not entail any changes in demand or supply, the ratio is equal to 0), and "absolute elasticity of supply and demand" (for sufficiently small change in pricesupply and demand expands to infinity).

Review elasticity coefficient would be incomplete if you do not pay attention to the factors that have an influence on the elasticity of demand and supply, namely:

- the existence of analogues (substitutes for the more original product, the elasticity of demand for it);

- the share of consumption goods (the lower the specific gravity, the lower the elasticity of supply and demand);

- the value of income;

- category of goods (whether he luxuries - demand is elastic, or basic necessities - there inelasticity of demand).