Price, Demand And Quantity
Economics notes
Price, Demand And Quantity
Equilibrium Price
➡️ Equilibrium price is the price at which the quantity of a good or service demanded by consumers is equal to the quantity supplied by producers.
➡️ Equilibrium price is determined by the interaction of demand and supply. When demand and supply are equal, the market is said to be in equilibrium.
➡️ The equilibrium price is determined by the intersection of the demand and supply curves. At this point, the quantity demanded is equal to the quantity supplied, and the price is stable.
How does an increase in price affect demand and quantity?
An increase in price typically leads to a decrease in demand, as consumers are less willing to pay the higher price. This decrease in demand can also lead to a decrease in quantity, as producers may reduce production in response to lower demand.
What factors influence the demand for a product?
The demand for a product is influenced by a variety of factors, including price, consumer income, consumer tastes and preferences, availability of substitute products, and overall economic conditions. For example, if a product becomes more expensive, consumers may switch to a cheaper substitute product, leading to a decrease in demand.
How does the law of supply and demand impact market prices?
The law of supply and demand states that as demand for a product increases, the price of that product will also increase, assuming supply remains constant. Conversely, as demand decreases, the price will also decrease. This relationship between supply and demand helps to determine market prices for goods and services.