Submitted by: Submitted by ericka008
Views: 140
Words: 664
Pages: 3
Category: Business and Industry
Date Submitted: 02/11/2013 09:41 PM
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...