ANSWERS TO CRAZY QUESTIONS IN YOUR MIND!!!
How the price, interest, exchange rate, fee are determined.
Supply and demand, which I mentioned in my previous article, are two concepts that solve many issues in economics.
The seemingly mysterious market mechanism is actually based on fairly simple foundations.
Supply is the quantity of a good offered to be sold in the market at a certain price. To supply, to produce, to produce…
Demand indicates the amount of honey that is desired to be purchased at a certain price. To demand, to demand, to consume, to consume…
I will make my next inferences by going over ceteris Paribus (other things constant). I talked about this concept in two previous articles. If you look at the event only from supply and demand, you will understand the basis of the event very well and we can go by putting it on.
Commodity Markets;
The price of a good is determined at the intersection of the quantity supplied and the quantity demanded. If supply increases while demand remains constant, the price decreases, and if supply decreases, the price increases. In other words, if there is a large amount of a good in the market and the demand is above the demand, the price of this good decreases. On the contrary, it rises.
The price of a good rises if the quantity demanded increases, and falls if the quantity demanded decreases.
Of course, it is possible for the demand for a good to increase the price if the supply of the good is limited, that is, if it is fixed. To understand supply and demand, we better understand the impact on them by holding each other constant. Supply and demand aren't the only things that affect price, but that's the most fundamental issue. Everything will be built on it.
As the price of a good increases, demand decreases and supply increases, and the opposite happens as the price of a good increases.
Labor Market;
If we look at the free market conditions and the case of ceteris Paribus…
The price of labor is wages. If we do not take the minimum wage determined by the state and the wage determined by the unions as a basis, supply and demand determine the wage.
As the number of labor supplied (workers, engineers, doctors, in short, employees) increases, wages decrease, and as they decrease, they increase. In the past, the shepherds were paid very little, now high wages are seen as the number of workers to work on the farms has decreased. With the entry of foreign nationals into the market, wage decreases are experienced in the market.
As can be seen here, supply and demand determine the price…
As the wage increases, the amount of labor offered to working life increases, and as the wage decreases, this amount decreases.
Money market;
In the money market, the price appears as INTEREST. So the price of money is interest. The interest level tells us how much money will be borrowed and loaned from that interest. As the interest rate increases, the amount desired to lend increases, and as the interest rate decreases, the amount desired to be borrowed increases. At the point where they meet (supply and demand for money), interest occurs.
If money is plentiful in the market, virtue is low; if money is low, virtue is high. Because someone needs money.
Let's pay attention to ceteris paribus in this regard, because the central banks of the countries interfere too much in the money markets. But the main issue is supply and demand again…
Foreign Exchange Markets;
When we see foreign currency as a commodity, the price of foreign currency is KUR. If the exchange rate is freely determined in the market, then the supply and demand for that currency determines the rate. The exchange rate is determined at the intersection of supply and demand amounts.
So far, I wanted to tell you about the importance of supply and demand and what they determine. Technically, I will explain supply and demand, the quantity supplied and the quantity demanded in my next article. What was important here was to show how important the basic concepts of economics were.
We will examine how economic terms such as price, wage, interest, and exchange rate determine, by adding all the arguments. However, any analysis you do without the foundation will not be correct.
Stay well.
Economics notes.