Individual and market demand of consumers. Formation of individual and market demand

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 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 relate).

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

Now it is precisely this aspect that we will pay attention to in order to understand the logic of the market and the patterns of formation of demand quantities more deeply.

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

Individual demand- the demand placed on the market by an individual buyer.

Market demand- the total demand presented on the market by all buyers.

Let's count - let's think

Let's imagine that we are analyzing the audio cassette market, where purchases are made by two buyers: Andrey and Sergey. The curves describing their individual demand models are presented in Fig. 3.6.

Rice. 3.6.

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

But they both come to the market, and here their financial capabilities merge into a single demand. This is what the extreme graph on the right in Fig. 1 reflects. 3.7. As we see on it, up to a price level of 6 units. The market demand curve repeats the demand curve of the richest buyer - Andrey. But then Sergei’s demand begins to influence the curve of total - market - demand.

Rice. 3.7.

As a result, at a price of 4 units. market demand turns out to be already equal to 15 cassettes (ten cassettes that Andrei was willing to buy at this price, plus five cassettes that Sergei was willing to buy at that price). And so on. Consequently, market demand is the sum of the individual demands of all buyers applying for goods on a given market.

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

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

Under the influence of these factors, demand can either increase or decrease (the demand curve will move up to the right or down to the left) or change the patterns of formation (the shape of the demand curve will change).

The last option is illustrated in Fig. 3.8. It shows two demand curves for the same good at different countries - A And IN. Curve A 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 quantity of demand occurs at a sufficiently high price level (P,).

Rice.

On the contrary, the curve IN 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 moves to the right (zone 2) only with very low levels prices: the largest quantity of demand occurs at 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 the liberalization of prices and the beginning of a sharp decline in production. This period was marked by a sharp drop in income for a huge share of the population after decades of roughly equal earnings. The result was a change in the shape of demand curves for most consumer goods, in full accordance with Fig. 3.8, s A on IN.

This meant that the bulk of buyers were able to buy only cheap goods. But they were no longer on the market due to a sharp rise in prices and the rapid rise 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 Russian economy, we have come close to the concept aggregate demand.

Aggregate demand- the total quantity of final goods and services of all types that all buyers in the country are willing to purchase within a certain time at the current price level.

The amount of aggregate demand is the total amount of purchases (expenses) made in a country (say, in a year) at the price and income levels that have developed in it.

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

Rice. 3.9.

The aggregate demand curve shows that with growth general level prices, the value of aggregate demand (the total amount of purchases of goods and services of all types in all markets of a given country) decreases in the same way as in the markets of individual ordinary (normal) goods.

But we know that if prices for individual goods rise, consumer demand simply switches to analogous goods, substitute goods, or other goods or services. At first glance, it is not clear how the overall demand for all goods and services can decrease, since there seems to be no switching of consumer spending here.

Of course, income does not disappear anywhere. The general patterns of consumer behavior are not violated in the aggregate demand model. They just appear here in a slightly special way.

If the general price level in a country rises 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 allocate some of their money:

• 1) to create savings in the form of cash and deposits in banks and other financial institutions;
• 2) purchasing 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) 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 their study is given great attention in the course of macroeconomics.

Let's count - let's think

Period 1990s 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)

Obviously such fast growth prices could not but affect the amount of 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, Russians began to “prepare for the worst in the future,” which manifested itself in an increase in the propensity to save. This is precisely the pattern of behavior of citizens of our country that is demonstrated in Fig. 3.11.

Rice. 3.11.

The fact is that in 1992 the Russians had real opportunity alternative use of their Money(by purchasing foreign currency as a store of income from inflation), and immediately their savings in the form of purchasing foreign currency began to grow faster than their spending on goods. This was evident in 1992-1997, when expenses for the purchase of foreign currency grew much faster than the total amount of expenses of citizens (by 8640 times, while the total amount of expenses increased by only 260 times). As a result, the share of expenses for purchasing foreign currency reached 18-20% of all expenses Russian families. But as soon as the growth of the yen slowed down somewhat in 1998, fellow citizens (having already created small foreign 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 foreign currency purchases fell. The acceleration of inflation in 1999-2000. again forced Russians to spend money on buying foreign currency large amounts 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.

Facts about individual demand

Individual demand is usually understood as demand generated by an individual consumer. It is determined based on the volume of goods that a person needs to purchase.

The dynamics and structure of individual demand depend on the purchasing power of the consumer. If a citizen has an impressive amount of free cash, then he will most likely be able to afford to purchase goods in a greater variety, best quality and on a regular basis. But the opposite situation is often observed - a person concentrates on purchasing expensive goods presented in 1-2 categories (for example, these can be mobile gadgets of prestigious brands), as a result of which the list of other types of purchased products is significantly reduced.

Market Demand Facts

Under market demand, it is customary to raise demand generated by one or another community of consumers - on a scale social group, region or entire country. It is determined, like an individual one, based on the volume of goods that community members need to purchase.

The dynamics of market demand, as in the previous case, depend on the purchasing power of consumers of goods. Depending on the number of buyers whose behavior is characterized by the first or second of the above-mentioned patterns - when, in the presence of a significant amount of free funds from the buyer, demand is formed for a greater variety of goods that have high quality, or not a large number of expensive goods - the prevailing structure of market demand emerges.

Comparison

The main difference between individual demand and market demand is that the first is formed by an individual, the second by a community of consumers. However, market demand is created by a combination of separate, individual demands.

Indicators of volumes of purchases of certain goods from different people may vary greatly at the level of individual demand. But in market demand, these volumes are summed up, in some cases their arithmetic average is determined.

For example, if buyer Ivanov purchases 10 boxes of chocolates per month, Petrov - 20, and Sidorov - 90, then the total market demand of this community will be 120 boxes of chocolates, and the average - 40.

The structure of a person’s individual demand can change quite often - based on his financial capabilities and preferences. In the case of the market, the situation is different. If the consumer community is large enough, then fluctuations at the level of individual demands may not significantly affect the structure of market demand.

Having determined what the difference is between individual and market demand, we record the main conclusions in the table.

Utility theory and analysis of consumer preferences. Consumer Equilibrium: Decision Making optimal choice. Ordinalist and cardinalist approaches to the study of consumer behavior.

The theory of consumption is based on the fact that the goal of each consumer is to maximize utility, i.e. Each buyer (consumer) strives to purchase with his income (budget) such a set of goods and in such a quantitative ratio as to most fully satisfy his needs (requests). That's why the main task, or the goal, of consumer theory is to reveal ways to maximize the degree to which consumers satisfy their needs, i.e. winnings from purchases. In this connection it arises consumer choice problem (rational) and factors influencing it. These factors are consumer preferences, as well as income and prices of goods and services.

When analyzing the problem, we proceed from the economic model of consumer choice, which is based on such assumptions regarding individual preferences as the possibility of the consumer assessing (measuring) the subjective usefulness of goods; his ability to compare and rank alternative sets of goods, and therefore determine priorities; preference for more goods over less; transitivity of preferences. Moreover, transitivity of preferences means that if a consumer prefers set A to set B, and the latter to set C, he thereby prefers set A to set C. Transitivity also implies that if a person does not distinguish between alternatives A and B, between B and C , then he should not make a distinction between A and C.

The critical factor that motivates behavior and determines consumer preferences and choices is utility. Utility is the beneficial effects people receive from consuming a good, i.e. a certain satisfaction (pleasure), reflecting the fact of the fulfillment of their requests or needs. Utility is the satisfaction an individual receives as a result of consuming a good. First of all, it is necessary to distinguish between general utility. Total or aggregate utility is a value characterizing the final (total) satisfaction from the consumption of a given amount of goods over a certain period of time

However, one cannot limit oneself only to the concept of general utility. It has been noticed that as needs become saturated and overall utility increases, the intensity of each individual need decreases. In other words, as the quantity of goods consumed increases and the corresponding need is satisfied, the utility of each subsequent unit of each good (additional utility) decreases. The utility of the last, or additional, unit of a good is called marginal utility. Those. marginal utility of a certain good is the satisfaction (the amount of additional utility) received by the consumer of each new additional unit of good, holding all other factors of consumption constant. Marginal utility- an increase in total utility when the consumption of a certain good increases by one. Total utility T.U. receives a quantitative relationship with marginal utility M.U.:

Thus, the marginal utility of a certain good is the additional utility from the consumption of each new unit of the good. This dependence is reflected in the formulated by economists principle (law) of decrease marginal utility, the essence of which is that how more quantity of goods consumed, the lower the marginal utility extracted from the consumption of each subsequent unit of this good . Relative prices reflect marginal utility. Therefore, the buyer behaves rationally, according to the theory of consumer choice, if he seeks to extract maximum benefit from the money at his disposal, i.e. he always prefers to purchase a set of goods that provides the greatest satisfaction. By spending each monetary unit and trying to increase total utility, the consumer sooner or later reaches a position in which the marginal utility per monetary unit spent on different goods is equalized. This will mean achieving a state of consumer equilibrium . Consumer equilibrium is a situation in which the consumer can no longer increase total utility by spending his budget on an additional unit of any good.

Consumer equilibrium is achieved when the ratio of the marginal utilities of individual goods to their prices is equal. If we denote marginal utility by M.U. then consumer equilibrium is ensured in the case of equality:

MUx/Px = MUx/Py = ... = MUn/Pn.

This is the consumer equilibrium in accordance with cardinalist concept of utility – equilibrium is achieved if the “last dollar rule” is satisfied: the marginal utilities per 1 (dollar, ruble, yen, etc.) of costs that the consumer extracts by purchasing any good must be equal. That is MU X/P X= MU Y /P Y , Where MU X And MU Y- marginal utilities of the last purchased units of goods X and Y, A R x And P Y- prices of the corresponding goods.

Cardinalist approach to the theory of consumer choice solved the question on quantification usefulness. This made it possible to answer two questions, the first is how to quantify utility and how the subjective assessment of utility and its relationship with demand and price turns into a pattern.

The cardinalist approach proposed virtual units of utility evaluation that could not be related to actual practice. However, if such an assessment remains absolutely hopeless for consumer goods, then the assessment of utility and marginal utility for factors of production is a widely and actively used practice up to today. Such an indicator of the utility and marginal utility of production factors is their productivity and marginal productivity. The latter will determine the demand for factors of production and their prices on the market. But this will be discussed in a special topic.

The second question is how the subjective assessment of utility, influencing demand and prices, turns into an objective law of demand. Since the subjective assessment of utility takes on a constantly recurring economic phenomenon, which reflects the cause-and-effect relationship between utility, demand and price in the actions of the dominant mass of people, this connection takes the form of an objective economic phenomenon, the economic law of demand.

Let us consider this phenomenon using a hypothetical example, based on the possibility of quantifying utility and provided that the utility of any monetary unit remains a constant value.

We present total utility (TU), marginal utility (MU) depending on the quantity of goods (Q) in the form of a table. Let us give marginal utility a monetary expression based on the condition - 2 units. marginal utility equal to 1 rub.

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

2. Market demand is a certain amount of a product that will be purchased certain number buyers at a given price and in this 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 a product, the curve will have a stepped appearance. Each consumer has a sensitivity threshold. A gradual reduction in price will not cause a stir and a sharp increase in demand. But if the cost of a product drops by a significant amount, this will cause increased interest among buyers.

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

1. Buyers’ income, which determines their budget.

2. The cost of goods that can replace these products.

3. Buyer 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 not significant.

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

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

Individual demand is the demand made by competitive consumers.

The individual demand curve shows the quantity of a product (good) that consumers want to buy at the appropriate price at the moment.

The geometric shape of the curve (negative slope) reflects inverse relationship quantity demanded (Q) and price (P), as well as the diminishing marginal utility of each additional unit of a good purchased, which explains the fall in its price (Figure 8.1).

Individual demand is influenced by: the price of the product, the consumer’s income level, the number of people in the consumer’s family, his social level, value system, and level of debt.

Figure 8.1 - Demand curve.

Movement along the demand curve (D) shows how a change in price (P) affects a change in quantity demanded (Q). In this case, the position of the demand curve D remains the same, i.e. the demand for the product has not changed.

The mechanism of market functioning obliges us to analyze situations in which many consumers and producers operate.

The concept of demand for a certain product reflects the behavior of the mass consumer. The volume of market demand for a given product consists of the demand of many entities acting as buyers in a certain period of time.

Market demand is influenced by: the price of the product, the income of buyers, the number of buyers, and buyer preferences.

The market demand curve shows the quantity demanded by all consumers at any price and is the sum of the demand curves of all market entities (Figure 8.2).

Figure 8.2 - Individual (a) and market demand (b)

It can be constructed from individual demand curves (horizontally) for a given product by adding its quantities (Q D1 + Q D2 + Q D3) that each buyer demands at each possible price per unit of product. Like the individual demand curve, except for market demand, it will have a negative slope.

Conclusion

The emergence of the theory of consumer behavior was associated with the work of marginalists, since one of the main provisions of marginalism is the principle economic man. The theory of consumer behavior examines a set of principles and patterns, guided by which each person forms and implements his own set of consumption of various goods, guided by the most complete satisfaction of his needs. This theory is associated with the concepts of total utility (that is, the total benefit from a certain amount of a good) and marginal utility (the degree to which a need is satisfied when the amount of a good increases).

Quantitative and qualitative theories were used to analyze utility. The quantitative theory of utility is based on the assumption that it is possible to compare different goods based on a comparison of their utilities measured in specific units. Qualitative theory implies not an absolute, but a relative assessment of utility, which shows consumer preference.

Graphically, the system of consumer preferences is depicted using indifference curves. This is the locus of points, each of which represents a set of two goods such that the consumer does not care which of these sets to choose. When choosing one of two goods, the concept of marginal rate of substitution arises. The marginal rate of substitution of good X for good Y is the amount of good Y that must be reduced when good X is increased by one unit so that the level of consumer satisfaction remains unchanged.

The choice of an individual is formed not only under the influence of preferences, it is limited by the budget. It is logical that for each consumer the total consumption should not be more income. This is depicted graphically using a budget line - a geometric locus of points representing the combinations of two goods available to the consumer for a given budget.

A change in the price of a good affects the quantity demanded through the substitution effect and the income effect. The substitution effect occurs when prices change and leads to increased consumption of cheaper goods. The income effect occurs because a change in the price of a given good increases (if the price decreases) or decreases (if the price increases) the real income, or purchasing power, of the consumer.

The study of consumer behavior is a complex science.

This paper outlines the basic concepts of consumer behavior problems, as well as maximizing the good, but consider all general theme impossible in one job. Therefore, to conclude, I would like to dwell on the main conclusions drawn during the implementation of this course work:

When choosing goods for consumption, the buyer is guided by his preferences;

The behavior of the consumer is rational, in particular, he puts forward certain goals and is guided by personal interest, that is, he acts within the framework of reasonable egoism;

The consumer seeks to maximize total utility, in other words, seeks to choose a set of goods that brings him the greatest total utility;

The consumer's choice and his subjective assessment of the utility of purchased goods is influenced by the law of diminishing marginal utility;

When choosing goods, the consumer's options are limited by the prices of goods and his income; This constraint is called the budget constraint.

Along with general principles The choice of a rational consumer has features that are determined by the influence of tastes and preferences on him.

Consumer choice is a set of goods that brings the consumer maximum total utility under budget constraints.

Thus, we can safely say that on this topic of the course work, key points have been extracted that give us the clearest picture of the problems that the consumer faces, how consumer behavior changes under the influence of certain factors and what motivates his choice.

consumer utility indifference demand