Chapter 14

What is the factors of Demand

How is market price determined?

Factors of Supply

Interaction between demand and supply

Supply, which refers to the quantities of the product you are selling for example the supply of beans is going to be higher than Rolls Royce because the cost of production is higher. The supply curve is different to the demand curve because as the price increases the business will try to supply more.

Equilibrium price is the price where the demand and the supply cross over and and they decide on the perfect price in order to have the perfect and most efficient way of their product making money

Demand this is talking about effective demand which means what people will buy in a certain market and at each price. Generally if the market price is low they will buy more because the product is more affordable. Apart from cars or mobile phones because if they are on a crazy offer then you can guarantee there is something wrong with them.

Wealth is like income but the accumulative value of the savings as well as wages but if you are wealthier you are more likely to be confident in buying big things like cars.

Advertising offers like two for the price of one on the TV people might be more likely to shop there rather than their normal shop therefore increasing demand.

Income leads to an increase in demand because if income rises which is generally unlikely but it does raise demand for normal goods, although people when they have more money they might stop buying Morrisons own and buy the branded version.

Demographic changes a larger population means more spending apart from with the demographics changing with the whole populations people. For example the shift in age population and their buying habits.

Taste and fashion like branded clothing or iPhones are essential to some people and their lifestyle

Price the higher the price the lower the demand because consumers can switch to a more affordable alternative (competitor) which is showed in the demand curve. Demand curves can change depending on the price going up or down.

Tax the government tax basically everything apart from cash in hand jobs and art, but they do this to raise revenue and if the tax increases on certain products for instance alcohol and sugary drinks then the supply of them will fall because it costs more to produce them. Either that or the price will rise which means there is less demand for it.

Price of other products is known as competitive demand so if the competitors are using an alternative product that is better than yours then the supply of your product will have less demand and could be discontinued

Cost a fall in costs will make supply rise. Because if the production cost and the cost of supply falls then they can afford to supply more products. If the costs of the business rise then they won't be able to supply as much.

Subsidy the government might want to encourage the supply of certain products such as organic fertilizer because they think it might be beneficial to the farming industry and to the environment.

Price, the relationship between price and demand is the opposite of price and demand, when the price is low the business will supply less of that product because it is less profitable than other products that can make more money

The supply refers the quantity of goods the business has to offer this means if the business has for instance they couldn't have 400 orders in if they can only supply 300.

The relations between demand and supply determine the equilibrium point where the demand and the supply curve matches and they cross over and the meet in the middle. This is used by businesses that want to know the exact point where the customers are the most pleased with the demand and the supply.

This is where the demand comes into play and they can supply as many as they like but if the demand isn't there then you are going to have excess products in a warehouse somewhere.