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Demand. Law of demand

Regardless of the specific type of market, its main elements are: demand, supply, price. Having studied these simple economic levers, we will be able to gain a deep understanding not only of individual economic problems, but also of the functioning of the entire economic system as a whole.

Demand is the defining parameter of the market, because it is based on the needs of people. The absence of needs determines the absence of not only demand, but also supply, i.e. no market relations at all. However, people's needs are not demand yet. In order for a need to turn into demand, it is necessary that the manufacturer can actually satisfy it, i.e. produce a certain amount of material goods, and the buyer must have money to buy this product.

Demand is the desire and ability of consumers to purchase certain goods in given economic conditions.

To explain the functioning of the market mechanism, a more precise definition is used - the volume (value) of demand.

Volume of demand is the quantity of a product that buyers in this moment can buy on the market. It follows that each price of a commodity corresponds to a certain amount of demand.

As known from Everyday life The higher the price of a product, the less the consumer's ability and desire to buy this product. This functional dependence is the content law of demand:There is an inverse relationship between the price of a good and the quantity demanded for that good, other things being equal.

This relationship can be shown as a graph. Each combination of price and quantity demanded corresponds to a specific point on the demand curve.

The figure shows the demand line D. On the vertical axis of the graph, the price of the goods (P) in monetary units is indicated, on the horizontal axis - the volume of demand for the goods (Q)

The demand line can have different shapes (straight, broken, concave, etc.), and therefore they usually talk about the demand curve.

For most goods, the demand curve has a negative slope, as there is an inverse relationship.

The operation of the law of demand can be explained by the following circumstances:

The principle of diminishing marginal utility, according to which subsequent units of a given product bring less and less benefit. Therefore, buyers will only buy additional units of a product if its price drops.

Income effect, i.e. when the price drops, a person can buy more of a good without giving up buying other goods in the same quantities.

Substitution effect, i.e. at a lower price, there is an incentive to buy a cheap product instead of similar products that have become relatively more expensive.

Many economists believe that there are exceptions to the law of demand.

1. Goods for the poor. When prices rise, the demand for them continues to grow (Giffen's paradox).

2. Goods for the rich. When prices rise, the demand for them increases due to the so-called prestige demand (the Veblen effect).

3. The effect of inflationary expectations. In the context of high inflationary expectations, following the rise in prices, the volume of sales may increase, as people fear that prices will rise even more tomorrow.

Since the market involves the presence of many buyers, it is necessary to distinguish between individual and market demand.

individual demand - is the demand from the individual buyer.

Market Demand - is the sum of the individual quantities demanded at each price.

Price is the main factor influencing demand. However, apart from the price, there are non-price factors. The most important of these factors include:

1. Prices for substitute goods (substitutes) and complementary goods. When two goods are substitutable, there is a direct relationship between the price of one and the demand for the other.

When two products are complementary, there is an inverse relationship between the price of one and the demand for the other.

Consumer tastes. The size of consumer demand depends on fashion trends, seasons, advertising, etc.

3. Consumer income. For most goods, an increase in income leads to an increase in demand. Goods, the demand for which changes in proportion to the change in income, are called superior goods or normal goods. Goods for which demand increases when income falls are called inferior goods. Inferior goods should not be confused with Giffen goods. The difference is that the demand curve for an inferior good has a negative slope, while for a Giffen good it has a positive slope.

4. Number of consumers.

5. Changes in consumer expectations regarding possible changes in prices or income in the future.

There are changes in the magnitude (volume) of demand and changes in demand. The change in demand is caused by a change in price. When the price changes, the ability to acquire goods changes, but not the desire to acquire goods. On the graph, this is reflected in the movement from one point to another along the demand curve.

The reason for the change in demand are non-price factors. A change in demand leads to a change in the desire to buy a product. This shifts the demand curve itself. If demand increases, the demand curve shifts to the right; if it decreases, it shifts to the left.

Speaking about the factors of formation and change in demand and its values corresponding to different price levels, we have not yet distinguished between two approaches to this problem.

The first of them was connected with how the demand of each individual buyer is formed (this is where, for example, the problems of the subjective assessment of the usefulness of a product belong).

The second aspect is the formation of demand on the scale of the entire market for goods of a certain type or the economy as a whole (this, for example, includes the demographic factor).

Now we will pay attention to this aspect in order to understand the logic of the market and the patterns of formation of demand values more deeply.

First of all, we should draw a line between individual and market demand.

individual demand- Demand presented in the market by an individual buyer.

market demand- the total demand shown in the market by all buyers.

Let's count - let's think

Imagine that we are analyzing the audio cassette market, where two buyers make purchases: Andrey and Sergey. The curves describing their individual demand patterns are presented in fig. 3.6.

Rice. 3.6.

It is easy to see that Sergey's money situation is worse than Andrey's: Sergey is ready to buy at least one cassette only at a price below 6 units, while Andrey is ready to buy at least one cassette at a price of 6 units. ready to buy five cassettes.

But both of them come to the market, and here their financial possibilities merge into a single demand. This is exactly what the last graph on the right in Fig. 3.7. As we see on it, up to the price level of 6 units. the market demand curve repeats the demand curve of the richest buyer - Andrey. But then Sergey's demand begins to influence the curve of total - market - demand.

Rice. 3.7.

As a result, at a price of 4 units. the market demand is already equal to 15 cassettes (ten cassettes that Andrey was ready to buy at this price, plus five cassettes that Sergey was ready to buy at that price). And so on. Consequently, the market demand is formed as the sum of the individual demands of all buyers applying for a product in a given market.

Thus, the formation and change in the values of market demand and market demand as a whole (under other unchanged conditions) significantly depend on:

1) on the number of buyers;
2) differences in their incomes;
3) the ratio in the total number of buyers of persons with different income levels.

Under the influence of these factors, demand can both increase or decrease (the demand curve will shift to the right-up or left-down), and change patterns of formation (the type of the demand curve will change).

The last option is shown in Fig. 3.8. It shows two demand curves for the same good in different countries - BUT and AT. Curve BUT describes the situation in the country's market, where incomes are distributed fairly evenly and the difference in their levels is not particularly large, so the demand curve here is quite smooth (zone 1 shows the place of the most noticeable bend). The greatest value of demand is formed at a sufficiently high level of prices (P,).

Rice.

On the contrary, the curve AT describes the situation in the market of a country where people with low incomes form a significant part of the population. And therefore, the demand schedule here sharply goes to the right (zone 2) only at very low price levels: the greatest demand is formed at the price C 2 .

In these purely theoretical constructions at first glance, any Russian economist will immediately recognize the situation in our country in the first years after price liberalization and the start of a sharp decline in production. This period was marked by a sharp drop in the income of a huge segment of the population after decades of roughly equal wage levels. The result was a change in the shape of demand curves for most consumer goods, in full accordance with Fig. 3.8, with BUT on the AT.

This meant that the bulk of the buyers were able to buy only cheap goods. But they did not exist on the market due to a sharp rise in prices and the rapid unwinding of inflation. As a result, Russians lost the opportunity to buy many types of consumer goods for several years. Domestic producers were unable to sell their products and found themselves in an extremely difficult financial situation.

Analyzing this situation in the Russian economy, we came close to the concept of aggregate demand.

Aggregate demand- the total amount of final goods and services of all kinds, which all buyers of the country are ready to purchase within a certain time at the prevailing price level.

The value of aggregate demand is the total amount of purchases (expenditures) carried out in the country (say, for a year) at those price and income levels that have developed in it.

Aggregate demand is subject to the general laws of demand formation, which were mentioned above, and therefore it can be graphically depicted as follows (Fig. 3.9).

Rice. 3.9.

The aggregate demand curve shows that with an increase in the general price level, the aggregate demand (the total amount of purchases of goods and services of all kinds in all markets of a given country) decreases in the same way as in the markets for individual ordinary (normal) goods.

But we know that in the case of an increase in the prices of individual goods, the demand of buyers simply switches to analogous goods, substitute goods, or other goods or services. At first glance, it is not clear how the total demand for all goods and services can decrease, since there seems to be no switching of buyers' expenses here.

Of course, the income does not disappear anywhere. The general patterns of buyers' behavior are not violated in the model of aggregate demand. They just show up in a different way.

If the general price level in the country increases significantly (for example, under the influence of high inflation), then buyers will begin to use part of their income for other purposes. Instead of purchasing the same amount of goods and services produced by the national economy, they may choose to spend some of their money:

1) to create savings in the form of cash and deposits in banks and other financial institutions;
2) the purchase of goods and services in the future (i.e., they will begin to save money for specific purchases, and not in general, as in the first option);
3) the purchase of goods and services produced in other countries. To better understand what this looks like in practice, let's look at an example.

The patterns of changes in aggregate demand determine the entire life of the country, and therefore much attention is paid to studying them in the course of macroeconomics.

Let's count - let's think

1990s period was a time of high, galloping inflation in Russia (Fig. 3.10): the price level in 1992 was 68 times higher than in 1990, and in 2000 - 12,181 times higher!

(times, 1990 = 1.0, logarithmic scale)

It is obvious that such fast growth prices could not but affect the aggregate demand for goods and services in the country: theoretically, it should have fallen. And so it happened. But at the same time, having found themselves in a crisis situation, the Russians began, as it were, to “prepare for the worst in the future,” which manifested itself in an increase in their propensity to save. It is precisely this pattern of behavior of citizens of our country that Fig. 3.11.

Rice. 3.11.

The fact is that in 1992, Russians had a real opportunity to use their money alternatively (by buying foreign currency as a means of saving income from inflation), and immediately their savings in the form of buying foreign currency began to grow faster than the cost of buying goods. This manifested itself in 1992-1997, when the cost of buying foreign currency grew much faster than the total amount of spending by citizens (by 8640 times, while the total amount of expenses grew by only 260 times). As a result, the share of expenses for the purchase of foreign currency reached 18-20% of all expenses of Russian families. But as soon as the growth of the yen slowed down somewhat in 1998, fellow citizens (having already created small currency savings “for a rainy day”) began to again spend an increasing part of their income on the purchase of goods and services, and the growth rate of currency purchases fell. The acceleration of inflation in 1999-2000. again forced the Russians to send larger sums to buy foreign currency than before. In other words, in

1990s in Russia, the hypothesis of the elasticity of aggregate demand with respect to prices and the inevitability of a decrease in the magnitude of this demand with an increase in the general price level were fully confirmed.

Individual and market demand is determined for each commodity price. But if the first indicator is the desires and capabilities of one buyer, then the second has a more voluminous meaning.

2. Market demand is a certain amount of a product that a certain number of buyers will acquire at a given price and at a given moment. That is, it is individual demand multiplied by the number of consumers whose capabilities and needs are satisfied by this product.

If we consider graphically the dependence of demand on the cost of goods, then the curve will have a stepped form. Each consumer has a sensitivity threshold. A gradual price reduction will not cause a stir and a sharp increase in demand. But if the cost of the goods becomes lower by a significant amount, then this will cause an increased interest of buyers.

But individual and market demand, in addition to cost, is influenced by other features. Among the main ones are the following:

1. The income of buyers, which determine its budget.

2. The cost of goods that can replace this product.

3. Buyers' preferences, which may change under the influence of certain events.

4. Number of consumers or market size.

5. Customer expectations.

Therefore, these factors may make the cost impact insignificant.

Consumer preferences can significantly affect the demand rate. This is the influence of fashion, national traditions, position in society and technological progress.

Demand depends on many factors. An individual indicator is considered in smaller economic formations. In the field of economics, within enterprises, companies and other large structures, market demand is considered.

1.Demand. The law of demand. Individual and market demand.

The main parameters of the market are: demand, supply, price. Demand is the defining parameter of the market, as it is based on the needs of people. The absence of needs determines the absence of not only demand, but also supply, i.e. no market relations at all.

However, people's needs are not demand. In order for a need to turn into demand, it is necessary that the manufacturer can actually satisfy it, i.e. produce a certain amount of material goods, and the buyer must have enough money to buy this product.

Demand - these are the needs of people for consumer goods and means of production that can be actually satisfied and provided with money. It is expressed as a graph showing the amount of a product that consumers are willing to buy at a certain price from the prices that are possible over a certain period of time.

The fundamental property of demand is as follows: with all other parameters unchanged, a decrease in price leads to a corresponding increase in the quantity demanded. Conversely, ceteris paribus, an increase in price leads to a corresponding decrease in the quantity demanded. In other words, there is an inverse relationship between price and quantity demanded. Economists call this feedbackLaw of demand . This law is based on the following facts:

A) common sense and elementary observation of reality. Usually people actually buy a given product more at a low price than at a high one. A high price discourages consumers from buying goods, while a low price increases their desire to buy.

B) In any given period of time, each purchaser of a product receives less satisfaction, or benefit, or utility, from each successive unit of the product. For example, the second chocolate bar eaten brings less pleasure than the first. It follows that since consumption is subject to the principle of diminishing marginal utility—that is, the principle that successive units of a given product bring less and less satisfaction—consumers buy additional units of a product only if its price falls.

C) Income and substitution effects. The income effect indicates that at a lower price, a person can afford to buy more of a given product without forgoing other goods. In other words, a decrease in the price of a product increases the purchasing power of the consumer's money income, and he becomes able and willing to buy more of the product at a lower price than at a high one.

The main factor influencing the magnitude of demand is the price. However, in addition to price, there are so-called non-price factors, the change of which shifts (in parallel) by some amount to the right or left of the demand curve. The most important of these factors include:

consumer tastes.

A favorable change in consumer tastes or preferences for a given product, caused by advertising or fashion changes, will mean that demand is increasing. Conversely, adverse changes will cause a decrease in demand.

Technological changes in the form of the emergence of a new product can also lead to a change in consumer demand. For example, the advent of CDs has led to a decrease in demand for long-playing records.

The number of buyers.

An increase in the number of consumers in the market causes an increase in demand, and vice versa, a decrease in the number of buyers leads to a decrease in demand.

For most goods, an increase in income leads to an increase in demand for them. Goods, the demand for which changes in direct connection with the change in money income, are called goods of the highest category, or normal goods.

But there are a number of goods, the demand for which changes in the opposite direction, that is, with an increase in income, the demand for such goods falls. They are called inferior goods.

In other words, with an increase in the income of the population, the demand for goods of higher quality, albeit at a slightly higher price, increases, and with a decrease in income, the demand for goods of lower quality, but cheaper, increases.

Prices for related products.

A change in demand due to a change in prices for related goods depends on whether these goods are interchangeable or complementary. A fungible good is a good whose use value is identical to that of another good. For example, butter is a substitute for margarine and vice versa. With an increase in the price of one of them (butter), the demand for a substitute product (margarine) immediately increases.

Complementary goods are goods, these are goods, the set of which constitutes a single use value. For example, a watch and a strap for them; tape recorder and cassette. An increase in price and a decrease in demand for one of the complementary goods simultaneously causes a decrease in demand for the other good.

Expectations.

They are usually associated with the orientation of people to increase prices and incomes in the future. So, for example, in conditions of unstable money circulation, inflationary expectations lead to a rush demand for goods and services. Expectations of lower incomes may cause consumers to limit their spending and make less demand for goods and services in a given period.

In addition to these factors, the state of demand in a given country is determined by the level of economic, social, cultural and political development society, the structure of the gross national product produced, the size of the national income and the nature of its distribution, the standard of living of the population, the policy of the state in a particular period of time, and other factors.

We depicted the feedback between the price of a product and the quantity demanded in the form of a two-dimensional graph, on which the quantity demanded is plotted along the horizontal axis and the price is plotted along the vertical axis.

10 20 30 40 50 60 70 80 Q

The process depicted is to place five price-quantity options on the chart, as shown in the following table:

We have drawn a graph by drawing perpendiculars from the corresponding points on the two axes. Each point on the graph represents a specific price and the corresponding quantity of a product that a consumer will buy at that price. On the graph, the resulting demand curve slopes down and to the right, since the relationship between price and quantity demanded by it is inverse. In the downward direction of the demand curve, the law of demand is reflected - people buy more of a product at a low price than at a high one.

So far, we have considered the question of the position of a single consumer. But there are usually many consumers in the market. The transition from the scale of individual demand to the scale of market demand can be carried out by summing up the quantities demanded by each consumer at different possible prices. The following table shows the case where there are three buyers in the market.

Unit price, R,	The value of individual demand
Unit price, R,	buyer Q 1	2nd buyer Q 2	3rd customer Q 3	Total demand per week (market demand) Q total \u003d Q 1+ Q 2+ Q 3

The following figures show the summation process in a graphical representation, and only one price is used for this - 3 conventional units. units To derive a demand curve, we combine the three individual demand curves horizontally.

35Q1 39Q2 26Q3

G ) P

Market Demand Curve - Sum of Individual Demand Curves

35 + 39 + 26 = 100Q

2. Perfect competition and its main features

In a market economy, all business entities act separately and act in relation to each other as competitors.

Under economic competition understand the competition of economic entities in the market for the preference of consumers in order to obtain the greatest profit (income). Competition is a necessary and important element of the market mechanism, but its very nature and forms are different in different markets and in different market situations.

In a market economy, competition is an important mechanism of economic relations between producers and consumers. So, if more goods are delivered to the market than buyers are able to purchase, then sellers will fight for the buyer, while lowering prices. If fewer goods are delivered to the market than the buyers are willing to purchase, then the latter will compete for the seller, thereby raising prices.

Competition, although it is associated with certain costs (increases socio-economic differentiation in society, causes the loss of economic resources from the ruin of the vanquished, etc.), at the same time provides a significant economic effect, stimulating price reduction, improving quality and expanding the range of products , introduction of scientific and technological achievements, etc.

In modern economics There are four market models, and, accordingly, types of competition:

perfect (pure) competition

monopolistic competition,

oligopoly

pure monopoly.

The last three types of competition are combined into a common name - "imperfect competition". The degree of market competitiveness is determined by the ability of firms to influence it and, above all, prices. The smaller this influence, the more competitive the market is considered.

The characteristic features of the main market models can be represented as follows:

Character traits	Market Models
Character traits	Pure competition	monopoly competition	Oligopoly	monopoly
Number of firms	Very big		Several
Product type	Standardization roved	Differentiated	Standardized and differentiated	Unique; no close substitutes
Price control	Missing	Some but in narrow confines	Limited mutual dependence bridge; signifi- telny with tai- nom collusion	Significant
Availability of information	Equal and own baud access	Some difficulties	Some restrictions	Some restrictions
Conditions for entering the industry	Very light obstacles missing	Relatively	significant obstacles	Blocked
Non-price competition	Missing		Very typical especially when differentiation product	companies with public organizations
	rural economy	Production clothes, shoes	Production cars	public utilities

Let's take a closer look at perfect competition and its main features.

Pure (perfect) competition characterized by a large number of competing sellers who offer standard, homogeneous products to many buyers. The volume of production and supply by each individual producer is so insignificant that none of them can have a noticeable effect on the market price. The price of homogeneous products in such a market develops spontaneously under the influence of supply and demand. It is based on the social value of commodities, which is determined not by individual, but by socially necessary expenditures of labor for the production of a unit of output. At a given price, the consumer does not care which seller to buy the product from. In a competitive market, the products of firms B, C, D, D, etc. are considered by buyers as exact analogues of the product of company A. Due to the standardization of products, there is no basis for non-price competition, that is, competition based on differences in product quality, advertising or sales promotion.

Competitive market participants have equal access to information, i.e. all sellers have an idea about prices, production technology, and possible profits. In turn, buyers are aware of prices and their changes. In such a market, new firms are free to enter and existing firms are free to leave. There are no legislative, technological, financial or other serious obstacles for this. The limiter here is only the profit received. Each entrepreneur will produce goods up to the point where price and marginal cost do not equalize. Up to this point, he will exist in this industry, after it he leaves the industry, moving capital to the one that brings the highest profit. This, in turn, means that resources under conditions of pure competition are distributed efficiently.

It should be noted that perfect competition in its purest form is a rather rare phenomenon. However, the study of this market model is of great analytical and practical importance and its purpose is:

study demand from the point of view of a competitive seller,

understand how a competitive manufacturer adjusts to the market price in the short run,

explore the nature of long-term changes and adjustments in the industry,

to assess the effectiveness of competitive industries from the point of view of society as a whole.

Task number 1.

Suppose there are 10 million workers in Canada, each of whom can produce 2 cars or 30 tons of wheat per year.

What is the opportunity cost of producing 1 car in Canada?

What is the opportunity cost of producing 1 ton of wheat per year?

Draw the Canadian production possibilities frontier. If Canada consumes 10 million cars, how much wheat will it consume?

Limited economic resources and unlimited
human needs give rise to fundamental economic
problem - choice problem directions and methods of distribution
limited resources between different competing goals.
Obviously, the choice in favor of one of the directions implies
inevitable rejection of alternative industries. The resulting
losses (in physical or value terms) are called alter-
native costs, or opportunity cost
(opportunity cost - English) production of this product. Opportunity cost is the monetary gain from the most beneficial of all alternative uses of resources.

In this example, 10 million workers could produce 20 million cars a year, but if they produced 1 car instead, the opportunity cost would be 20 million cars - 1 car. = 19 999 999 cars, i.e. this is the number of cars that were not produced.

The situation is similar with the cost of lost opportunities for the production of 1 ton of wheat per year. 10 million workers multiplied by 30 tons of wheat = 300 million tons per year can be produced by workers, but if they produce 1 ton, then the opportunity cost will be 300 million tons - 1 ton =

299 999 999 tons of wheat.

Now let's draw the Canadian production possibilities frontier:

0 100 200 300

On the Canadian production possibilities graph, the horizontal is the amount of wheat, and the vertical is the number of cars. The chart data is, of course, only an abstract model of Canada's actual manufacturing potential. But it is important for us to show that at any moment in time the country has limited capabilities and cannot break out of the production possibilities frontier.

The graph shows that if Canada consumes 10 million cars, then the amount of wheat consumed will be 250 million tons.

Task number 2.

Determine the average and marginal product of the firm if the following data are known:

When will the law of diminishing returns come into play in this case? Draw a graph of the firm's average and marginal products. What is the relationship between these curves?

marginal product - these are changes in the total (cumulative) product per 1 worker, with an increase or decrease in the number of employed workers.

For example, in our problem: when the number of workers increases from 4 to 5, then the total product per year increases from 120 to 130. Therefore, the marginal product of the 5th worker will be = 130 - 120 = 10. Similarly, we calculate the marginal product of the remaining workers.

Average product is the output per worker employed. The average product is equal to the ratio of the total output to the number of workers.

Number of workers	Aggregate (general) product, TR	Ultimate

Law of diminishing returns states that, starting from a certain moment, the successive addition of units of a variable resource to an unchanged, fixed resource gives a decreasing marginal product per each subsequent unit of a variable resource.

For this example, the law of diminishing returns will begin to operate from the moment the number of employees increases to 3 people.

Graphically, the firm's average and marginal products would look like this:

Increasing Decreasing marginal Negative

Ultimate return Ultimate return

50 recoil

30 average product

20 limit

product

number of workers

The relationship between the curves of average and marginal product is as follows: where marginal product exceeds the average, the latter increases. Wherever marginal product is less than average product, average product declines. It follows that the curve of marginal product intersects the curve of average product just at the point at which the latter reaches its maximum.

List of used literature:

Dolan E.J., Lindsay D. Microeconomics. SPb., 1997

Zubko N.M. Economic theory - Mn .: "NTC API", 1998.

Kazakov A.P., Minaeva N.V. Economy. Training course on the basics of economic theory. - M .: LLC "GNOMPRESS", 1998.

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Speaking about the factors of formation and change in demand and its values corresponding to different price levels, we have not yet distinguished two approaches to this problem.

The first of them was related to how the demand of each individual buyer is formed (this is where, for example, the problems of subjective assessment of the usefulness of a product belong).

Second the same aspect is the formation of demand on the scale of the entire market for goods of a certain type or the economy as a whole (this, for example, includes the demographic factor).

Now we will pay attention to this aspect in order to understand the logic of the market and the patterns of formation of demand values more deeply.

First of all, we should draw a line between individual and market demand.

individual demand is the demand placed on the market by an individual buyer.

market demand- the total demand shown in the market by all buyers.

The formation and change in the values of market demand and market demand as a whole (under other unchanged conditions) significantly depend on :

1) number of buyers;

2) differences in their income;

3) ratios in the total number of buyers of persons with different income levels.

Under the influence of these factors, demand can both increase or decrease (the demand curve will shift to the right-up or left-down), and change the patterns of its formation (the type of the demand curve will change).

The last option is shown in Fig. one.

Rice. 1. Dependence of demand on the share of people with different income levels in the total mass of buyers

On fig. 1 shows two demand curves for the same product in different countries - A and B. Curve BUT describes the situation in the country's market, where incomes are distributed fairly evenly and the difference in their levels is not particularly large. Therefore, the demand curve here is quite smooth (the zone marked with a circle with the number 1 shows the place of the most noticeable bend). The greatest value of demand is formed at a sufficiently high level of prices (C1).

Against, curve B describes the situation in the market of a country where people with low incomes form a significant part of the population. And therefore, the demand graph here sharply goes to the right (the zone marked with a circle with the number 2) only at very low price levels: the greatest demand is formed at the price C 2 .

In these purely theoretical constructions at first glance, any Russian economist will immediately recognize the situation in his country in the first years after price liberalization and the start of a sharp decline in production. This period was marked by a sharp drop in the income of a huge segment of the population after decades of roughly equal wage levels. The result was a change in the shape of demand curves for most consumer goods, in full accordance with Fig. 1, from A to B.

Analyzing this situation in the Russian economy, we came close to the concept of aggregate demand.

Aggregate demand- the total amount of final goods and services of all kinds that all buyers of the country are willing to purchase during a certain period of time at the prevailing price level.

The value of aggregate demand- this is the total amount of purchases (expenditures) carried out in the country (say, for a year) at those levels of prices and incomes that have developed in it.

Aggregate demand is subject to the general patterns of demand formation, which were mentioned above, and therefore it can be graphically depicted as follows (Fig. 2).

Rice. 2. Country Aggregate Demand Curve

Aggregate demand curve shows that with an increase in the general price level, the aggregate demand (the total amount of purchases of goods and services of all kinds in all markets of a given country) decreases in the same way as in the markets for individual ordinary (normal) goods.

Of course, the income does not disappear anywhere. The general patterns of buyers' behavior are not violated in the model of aggregate demand. They just show up in a different way.

If the general price level in the country increases significantly (for example, under the influence of high inflation), then buyers will begin to use part of their income for other purposes. Instead of acquiring the same amount of goods and services produced by the national economy, they may choose to spend some of their money on:

1) creation of savings in the form of cash and deposits in banks and other financial institutions;

2) the purchase of goods and services in the future (i.e., they will begin to save money for specific purchases, and not in general, as in the first option);

3) the purchase of goods and services produced in other countries.

The patterns of changes in aggregate demand determine the entire life of the country, and therefore much attention is paid to studying them in the course of macroeconomics.

Demand. Law of demand

The value of individual demand

Demand and offer elements market mechanism