Business Proposal

LAW OF DEMAND

-The higher the price the less consumers will purchase and visa versa.

-Diminishing marginal utility- Because successive units of a particular product yield less and less marginal utility, consumers will buy additional units only if the price of those units is progressively reduced.

-Income effect- a lower price increases the purchasing power of a buyer’s money income, enabling the buyer to purchase more of the product than before. A higher price has the opposite effect.

-Substitution effect- suggests that at a lower price buyers have the incentive to substitute what is now a less expensive product for similar products that are now relatively more expensive.

DETERMINANTS OF DEMAND

1) Consumers’ tastes (preferences)- a change that makes the product more desirable will –means more of it will be demanded at each price.

2) Number of buyers in the market- location, employment rates, government assistance.

3) Consumers’ incomes- Government assistance, location

4) Prices of related goods- Headstart, public education, family owned day cares, relatives,

5) Consumer expectations- A newly formed expectation of higher future prices may cause consumers to buy now in order to beat the anticipated price rises, thus increasing demand.

LAW OF SUPPLY

* As price rises, the quantity supplied rises; as price falls, the quantity supplied falls. This relationship is called the law of supply. A supply schedule tells us that, other things equal firms will produce and offer for sale more of their product at a high price that at a low price

* Number of employees

* To a supplier, price represents revenue, which serves as an incentive to produce and sell a product.

* -The higher the price, the greater this incentive and the greater the quantity supplied.

DETERMINANTS OF SUPPLY

1) Resource prices- Hourly rate of employees, food costs, location (real estate) Lower resource prices reduce production costs and...