To explain the processes taking place in the economic space, there are a number of rules and regularities. One of the central ones is the market equilibrium of supply and demand - a harmonious situation that satisfies both communicating parties. This concept has practical value, allowing to produce conscious regulation of relations.
What is market equilibrium?
The economic system can be viewed from the position of the best and worst state. Market equilibrium is a perfectly balanced position that does not require correction. Consumers are satisfied with the quality of the product and its value, and sellers do not try to overstate prices, artificially create a deficit and vary the characteristics of the product to reduce the cost of production.
Equilibrium in the economy
Purchasing power and output are continuously in contact. Market equilibrium is in the economy the best combination of both positions. Analyze such situations using a simulation that demonstrates static or dynamic. In the first approach, the market equilibrium is evaluated at a particular moment, and the second option is aimed at studying the changes of each parameter in time.
Market equilibrium functions
Visualization of the situation is carried out by plotting graphs that show the size of supply and demand. With their help, one can see a violation of market equilibrium and find out its causes. The main characteristic of the balance point is the price, which has a number of functions.
- Measuring . Helps to understand the value of the goods.
- Commensurate . It is necessary to compare the value of different goods and services.
- Informational . Reflects needs, deficits, excess.
- Balancing . It allows you to find a balance between supply and demand without going into deficit or surplus.
- Guide . Gives a signal about the fluctuation of needs, to which manufacturers must respond in order to maintain market equilibrium.
- Stimulating . The supplier tries to reduce costs to obtain greater profits, and resource owners search for the most profitable spheres, as a result, the factors of production are distributed rationally. Consumers are looking for a lower price, trying to optimally spend their money.
- Accounting . Reflects the cost of manufacturing the product.
- Foreign economic . Used for transactions and settlements between countries.
- Distributive . Demonstrates the placement of income, resources and goods.
What is the expression of market equilibrium?
Analytical work on the study of market fluctuations is carried out using formulas and graphical reflection of the state to simplify the visual perception of the changes that have occurred. The main parameters of market equilibrium:
- requests;
- sentence;
- price.
Types of market equilibrium
Researchers use two methods of assessing market equilibrium.
- Walras's approach . It implies interaction between sellers and consumers in conditions of free competition. With the departure of prices from the equilibrium action of one of the parties help to return it to the required level. When the deficit becomes active, buyers, with excess - the producers.
- The Marshall Market Equilibrium Model . Assumes a description of the long period. Reliance is made on the proposal, if it is not perfect, then the manufacturer takes measures, focusing on the amount that the client is ready to give. In this approach, the mechanism of market equilibrium is monitored only by sellers.
Market equilibrium and cost-effectiveness
One of the most interesting sections of economic theory is devoted to problems of equilibrium, which can be partial and general. In the first case we are talking about a separate market, without taking into account the impact of price changes on one compartment on neighboring spheres, that is, the feedback effect. With a common balance, close contact of prices on different platforms is considered, in which each subject can get the most out of his efforts.
Market equilibrium and efficiency are interrelated, since in the presence of an optimal balance, resources are best distributed. Manufacturers use them with the maximum profit, without the use of "dirty" technology. With the effectiveness of manufacturing products, no new approaches to creating goods and trade will not give an increase in the winnings.
Ways to achieve market equilibrium
Buyers and manufacturers are in continuous interaction, which helps to find the best ratio. We will analyze how the market equilibrium is established.
- Price increase . It is necessary in case of a scarcity issue.
- Reduced price . Can help with excess production.
- Stimulation of the issue . Can overcome the deficit, but will lead to lower prices.
- Cutting the release . It is necessary to raise prices and eliminate excess problems.