Keep going through chapter two, "Direct exchange." we sell and buy horses for fish barrels. I suggest you refresh your memory with the previous article about supply and demand curves.
Elasticity of demand:
Knowing the demand curve, we can calculate how much of the total good will be spent at a certain price. for example, if three people are ready to buy a horse for 95 barrels of fish, then only 285 barrels will be spent. this isthe total cost at a certain price.
The peculiarity of the total costs is that they can both grow and fall when the price changes. for example, if there are a lot of new people who want to buy with a small price drop, the total costs will increase. And if the numberof buyers remains the same as it was, they will fall.
If a decline in price in a certain range leads to an increase in total costs, it is said that the demand is elastic in thisrange. If it is falling, it is not elastic. let's say that 96 horses are ready to buy two horses, and 95 horses are ready to buy three horses, as well as 94 horses. Then the total costs at 96 will be 192, at 95 - 285, and at 94 - 282. It means that the demand is elastic on the segment 95...96, but it's not elastic on the segment 95...94.
It is not necessary to compare the neighboring values. it may turn out that the demand is elastic in some wide range except for some fragments. In our example, demand is elastic in the range of 94...96.
Of particular interest is the elasticity in the equilibrium price region.
The concept of "supply elasticity" does not make sense. If for each price we take the number of units offered and multiply by this price to get the "total potential income", we will find that it always rises, because when the pricerises, the supply rises. in this sense, the supply is always "elastic," so there is no point in talking about it at all.
Assumptions (speculations):
We found out earlier that the good has not only a direct value, but also an exchange value.
Before the equilibrium price is formed, people try to predict what it will be like and act on their assumptions. Therefore, they will not want to buy a good at a price higher than the supposed equilibrium price (because they expect it to become cheaper soon), but will hurry to buy a good at a price lower than the supposed equilibrium price (because they will be able to resell it later).
Thus, the existence of the exchange value and people's assumptions about the final equilibrium price influence the demand curve. Demand above the expected equilibrium price becomes much lower; below - much higher.
The more the assumptions, i.e. speculation, about the final price play a role, the faster {the price|the worth|the value} can reach the equilibrium price.
The expected exchange value of a good is a type of benefit. it is the same factor in the scale of human values as the benefits of direct use. Speculation does not change the fact that the seller and the buyer act on their own value scales and that each particular exchange will only take place if the provisions of the exchange of benefits in the value scales of the participants are in the opposite relationship.
It is believed that the price is determined not only by the benefit, but also by the costs. but the costs are the benefits that a person gives up on the exchange. That is, when we talk about costs, we mean the lost benefits of what is lower on the value scale. Therefore, costs are not something separate and independent, they are already included in the concept of benefit.
The benefit to be gained will be beneficial in the future (perhaps in the very near future, immediately afterpurchase, but still). The lost benefit of the given good also refers to the future - it is the benefit that a person will not be able to receive anymore. Therefore, the costs of the past do not affect the action, and therefore the price.
Thus, benefit and only benefit determine the price of benefits on the market. It also determines the number of benefits to be exchanged and the nature of the supply and demand curves.
Why it's impossible to switch to dollars:
When the ruble once again began to fall sharply, someone asked on Twitter, "Why not the whole world switch to dollars? Then there will be no exchange rate fluctuations, no one will lose money and everything will beconvenient. The author thought he was joking. Actually, common sense suddenly broke through the thick of propaganda."
Actually, why can't we switch to dollars all over the world? Why does the country need its own, separate currency?
The answer depends on what we call a "country". If the country counts working people, then they certainly do notneed separate currencies, which can be judged by the rate of runs in exchangers for dollars. but if the country considers the representatives of the state, the situation changes radically, because their own currency provides them with the possibility of inflation.
Therefore, those who call themselves the "state" are afraid of a sharp fall of the ruble most of all. After all, everyone will switch to dollars. when the fall of their currency becomes uncontrollable, they impose restrictions and then bans on foreign currency transactions. and then possession of foreign currency becomes a crime on a national scale (that is, a crime against).