The economic systems of most countries have features of the market principle of business organization. This determines the features of the development of society. The interaction of supply and demand in the global market is the main driver of progress.
It happens according to certain laws. Studying similar principles of the interaction of demand, supply and price, we can make a forecast of further trends. By adjusting the development movement, humanity can reduce negative manifestations and maximize the positive aspects of the economic system.
Therefore, the study of the impact of the market equilibrium of demand, supply and price, their interaction is extremely important for any society.
Market concept
The modern market is a set of exchange processes between producers of goods, services and consumers. Money is involved in this process.
The market operates according to certain laws. Two centers interact on it. On the one hand, these are enterprises, organizations, and on the other, ordinary consumers.
The interaction of market demand and supply is of increased interest from financial services. Indeed, the needs of society are unlimited, and production operates in conditions of limited resources.
Therefore, the relevant services constantly monitor which goods and services are more in demand today. To stay on the market, enterprises produce only the products most necessary for the consumer, trying to occupy their specific niche.
Market self-regulation
One of the basic principles of market organization is its self-regulation. Such a mechanism of functioning occurs in the context of the interaction of aggregate supply and demand.
In order to meet the modern requirements of society as much as possible, these categories are constantly studied and monitored. This requires knowledge of the principles of supply, demand and market prices. The latter is an indicator for both producers and consumers.
The interaction of prices, supply and demand affects the decision how much to produce, in what quantity and what goods to purchase. Price affects the course of both private and global processes in the economy. It can be called one of the most important categories in the study of market laws.
Demand definition
Demand is the desire of the buyer, as well as his ability to purchase certain products at a price set by the manufacturer. Its value is determined by the number of goods and services that a consumer can buy.
For this to happen, a person must have the desire and ability to buy the necessary goods in a particular place, in a certain amount and at a set cost.
This is called purchasing power. To understand the interaction of aggregate demand and aggregate supply, it is necessary to consider the behavior of each of this category separately.
There is a certain law. If the supply is constant, the demand will be the higher, the lower the cost of products on the market.
Consequence of the law of demand
The above pattern is confirmed by a number of market phenomena.
There is the concept of a price barrier. If the price increases, a certain part of consumers, even having a desire to purchase products, will not be able to do this. The higher the price, the higher this barrier.
Accordingly, a reduction in cost leads to income effect. Saves additional consumer resources.Buyers will be able to spend them on other products.
Substitution effect is to choose from two interchangeable goods one that is cheaper. A decrease in the usefulness of products is observed with the acquisition of each additional unit. Less useful services or goods the consumer will buy only at a lower price.
There is also a Giffen effect. This economist determined that with the increase in the value of some products, their consumption increases. This is true, for example, for food, because they need food. Just the amount that the family spends on it will increase with increasing value.
Proposal definition
The interaction of supply and demand in the market is regulated by price. If the consumer has the purchasing power with respect to a particular product, the manufacturer should take this into account. If he has the desire and the ability to make the right product for people at a set price, this is an offer.
Since resources for production are limited, it has its own quantitative expression. This is the value of the proposal. It is formed according to a certain law.
If demand is unchanged, then with an increase in the cost of goods in the market, enterprises and organizations increase their supply. This counteracts the law of demand. Therefore, the mutual influence of the main driving factors of the market restrains each other.
Non-price factors affecting the offer
The interaction of supply and demand, the equilibrium of which determines the price, also depends on various kinds of non-price factors of supply.
It is affected by the quality and range of finished products. The cost of raw materials also refers to such influences. The higher it is, the less the company will produce, ceteris paribus, goods.
In modern conditions, you can increase the value of the proposal using an intensive approach. Scientific developments, the introduction of new technology, automation make it possible to produce a greater number of popular products or provide services with an unchanged amount of raw materials and the value of the finished product.
The offer is also affected by the prices of substitute products and the number of competitors. 
Non-price factors include subsidies, taxes and subsidies. Even in a market economy, the state with the help of certain control levers can influence the processes of interaction of the main economic categories.
Equilibrium price
Confronting each other, the main market categories are balanced in a certain way. There comes a moment when the quantity of goods or services coincides with the amount of products that customers are willing to purchase. This interaction of supply and demand is called equilibrium price.
This is an ideal market condition. But in real conditions, this situation is rare. If supply exceeds demand, there is an excess of goods. Otherwise, there is a shortage of products that consumers are willing to buy.
However, all these categories strive to balance. This is the most favorable position for all participants in market relations.
Demand elasticity
Under the influence of various factors, the interaction of supply and demand is changing. Market equilibrium is more or less susceptible to such influences.
To calculate the susceptibility of the main categories to variable conditions, the concept of elasticity is used. It is measured as percentages or ratios. Changes in demand are compared with increased or decreased prices by 1%. But the relative value of elasticity is found by comparing the current value of the indicator to its original value.
Absolute elasticity manifests itself in the case when, with a slight change in price, either a complete decrease or an endless increase in the indicator occurs. Inelastic Demand does not change when the price changes.
Elasticity rules
The interaction of supply and demand under the influence of various factors obeys a number of rules.
If the product has many competitors or substitutes, the demand for it will be elastic. Also on this indicator affects the cost of production. Demand will be more elastic for expensive goods than for cheap ones.
The length of the period during which a price change is observed also affects the degree to which market categories are exposed to new conditions. The longer this length of time, the more elastic the demand.
Changes in prices affect the essentials minimally. Such products include water, bread, salt, and medicines. In this case, the expenditures on these goods will increase in the family budget with a constant level of consumption.
Having studied the interaction of supply and demand, we can conclude that the welfare of society depends on their balance. They establish the rules for the functioning of the market. To prevent a deep crisis, the state to some extent should direct the ongoing processes.
