42830 (Economics. Demand, supply, and elasticity), страница 2

Earlier we have examined the demand decisions of buyers and the supply decisions of sellers, separately. However, in the market for any particular good, the decisions of buyers interact simultaneously with the decisions of sellers. When the demand for a good equals the supply of the good, the market for the good is said to be in equilibrium. Associated with the market equilibrium will be an equilibrium quantity and an equilibrium price.

Elasticity

In addition to understanding how equilibrium prices and quantities change as demand and supply change, economists are also interested in understanding how demand and supply change in response to changes in prices and incomes. The responsiveness of demand and supply to changes in prices or incomes is measured by the elasticity of demand or supply.

If the percentage change in quantity demanded is greater than the percentage change in price, demand is said to be price elastic, or very responsive to price changes. If the percentage change in quantity demanded is less than the percentage change in price, demand is said to be price inelastic, or not very responsive to price change. Similarly, supply is price elastic when the percentage change in quantity supplied is greater than the percentage change in price, and supply is price inelastic when the percentage change in quantity supplied is less than the percentage change in price. The price elasticity of demand or supply will differ among goods.

Summary

In this report I consider terms “economics”, “macroeconomics”, “microeconomics”, “economic policy”, “demand”, “supply” and others.

Economics is the study of how society allocates scarce resources and goods. Resources are the inputs that society uses to produce output, called goods. The subject of economics is divided into two main theories; they are macroeconomics and microeconomics. Macroeconomics considers the aggregate performance of all markets in the market system and is concerned with the choices made by the large subsectors of the economy — the household sector, which includes all consumers;

Microeconomics considers the individual markets that make up the market system and is concerned with the choices made by small economic units such as individual consumers, individual firms, or individual government agencies.

An economic policy is a course of action that is intended to influence or control the behavior of the economy. There are goals of economic policy:

1. economic growth;

2. full employment;

3. price stability.

Opportunity cost is the important concept in economic analysis. The opportunity cost of a decision or choice that one makes is the value of the highest valued alternative that could have been chosen but was instead forgone.

In every market, there are buyers and sellers. The buyers’ willingness to buy a particular good (at various prices) is referred to as the buyers’ demand for that good. The sellers’ willingness to supply a particular good (at various prices) is referred to as the sellers’ supply of that good.

It is important to keep straight the difference between a change in quantity demanded, and a change in demand. There is only one reason for a change in the quantity demanded of some good: a change in its price; however, there are several reasons for a change in demand for the good, including:

1. changes in the price of related goods;

2. changes in income;

3. changes in preferences;

4. changes in expectations.

The law of supply: a direct relationship exists between the price of a good and the quantity supplied of that good. A change in supply is caused by factors, including:

1. changes in the prices for other goods;

2. changes in the prices of inputs;

3. changes in technology:

When the demand for a good equals the supply of the good, the market for the good is said to be in equilibrium.

I think studying economics is very important for people. Economics is the study of how society allocates resources and goods. If people know what economics, economic policy, economic analysis are they understand the economic processes.

List of literature

1. Дюканова Н.М. Английский язык для экономистов: Учеб.пособие. – М.: ИНФРА-М, 2006. – 320 с.

2. Большой англо-русский экономический словарь / Составители С.С. Иванов, Д.Ю. Кочетков. – М.: ЗАО Центр-полиграф, 2005. – 620 с.