Supply and demand
-
Consumers
demand products and services.
-
Businesses
supply products and services.
-
Market
depends on both demand and supply.
Demand
Demand is
the quantity of particular goods or services the market is willing to buy.
The law
of demand:
-
It
states that when the market demands a high quantity of a good or service the
prices will be high.
-
When
the market demands a low quantity, the prices will be low.
Consumer
demand depends on:
a)
Price
of goods:
-
Demand
will depend on the price of the product or service.
b)
Price
of substitute and complementary goods
-
Substitute
goods are those that are easily replace other. Ex: tea for coffee.
-
Complementary
goods are goods used with another good. Ex: DVDs with DVD players.
c)
Consumer
income
d)
Preferences
and tastes
-
What
consumers like and choose affects demand.
-
Image
and advertising influence consumer tastes.
Supply
Supply is
the producer side of the market. Supply refers to the quantity of goods and
services that producers and sellers are willing or able to sell.
The law
of supply:
-
It
states that as price rise, the quantity supplied tends to increase.
Supply
depends on:
a)
Cost
of production
b)
Changes
in technology
c)
Desire
to own and operate a business
d) Environmental and other conditions
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