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Principles of Economics and Publiv Finance - Essay Example

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Principles of Economics and Publiv Finance

A market system is necessary to convey the decisions made by buyers and sellers of products and resources".
Independent economies and enterprise organizations form a private sector, and the state forms public sector. In spite of the fact that the market is self-regulated, the state takes measures on its regulation: establishes a marginal level of the prices for the certain goods and services, a minimum level of wages, limits a competition in the separate markets, etc.
Buyers forms demand for the goods and services. Hence, constantly increasing needs form the demand. In the economic theory there is a standard definition of demand. Demand is ability and desire to purchase goods and services. It is influenced with some factors (non-price factors): tastes and preferences of consumers, quantity of buyers in the market, the prices for the goods-substitutes, and a level of income of buyers, consumer expectations concerning the future prices, income and presence of goods.
The price of the goods and quantity of demand for these goods are inversely proportional quantities. Economists name this the law of demand. That is the higher the price of the product, the less the consumer will demand with other things being equal.
Manufacturers make the goods and services, which they consider it is possible to sale in the market. Set of commodity producers provides to people the satisfaction of their solvent demand, that is forms the supply. The supply is desire and ability of manufacturers to give the goods for sale in the market. Ability to give the goods is connected with use of the limited resources, which are not always enough to satisfy needs of all people. Thus, the supply is a quantity of the goods and services, which a seller wishes and able to sell. That is the law of supply states, the higher the price, the larger the quantity supplied, all other things constant.
Supply Curve

Thus, in the market, on the one hand, there are manufacturers from the side of supply and consumers from the side of demand. So, the intersection of the demand curve D and the supply curve S represents the equilibrium price Pe where a quantity Qe of commodities will be sold. Changes in the market (moving curves D or S to the left or the right) will change the equilibrium price.

So, market price, at which the supply of an item equals the quantity demanded, is called an equilibrium price. "Equilibrium price and/or equilibrium quantity change when the market demand and/or market supply curves shift. Equilibrium price and equilibrium quantity both rise when there is an increase in market demand with no change in the market supply curve. Equilibrium price falls while equilibrium quantity increases when market supply increases and demand is unchanged" (Salvatore, 2003, p.18).
Generally in market system they allocate two basic types of the markets: the market of resources and the market of products. Interaction of these two markets describes the model of circulation of resources, products and income. Economies give the resources (the ground, work, capital, enterprise ability) to the enterprises on the ...Show more


The market is a set of economic relations and the most effective tool of development of economy. The basic feature of the market is ability to self-regulation. In basis of functioning of a market lays competition as a basic motive to struggle for a place in the market…
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Principles of Economics and Publiv Finance essay example
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