Does high demand increase or decrease prices?
High demand could possible increase or decrease price of the product:high demand, decrease the price: when there are high demand of products. The company raises the capital, build factory, and produce mass production. When they make more products then the revenues go high. Even they sell with low price and increase the profit at the same time.high demand, increase the price: old rule! when customers want to buy more and you have limit products. Yes, you can increase the price and you can still sell your products.
How does price influence market demand?
According to theory - the demand of a product increases with fall in price and demand decreases with rise in prices , while other factors should remain constant .It can be understood in a manner - lets take a hypothetical situation where a car is sold at 5 Lakh Rs and there are 20 people willing to purchase it and can afford it also . Now suppose price falls to Rs 4 Lakh then 30 people would be willing and able to puchase it as more people have the ability to purchase it .Price and demand have inverse relationship.In the above diagram ,demand of product increases from Q to Q1, when the price falls from P to P1. It means people can buy more quantity then before in the same price thus demand of a product increases and demand shift towards right I.e from A to B and this is known as downward movement along the same demand curve.Similarly In the above diagram ,demand of product decreases from Q to Q2, when the price rises from P to P2. It means people can buy lesss quantity then before in the same price thus demand of a product decreases and demand shifts towards left I.e from A to C and this is known as upward movement along the same demand curve.SUMMARIZED VIEW OF THE CONCEPT
What is a perfect elastic demand?
Perfectly elastic demand is a situation when there are close substitutes available in the market. A slight variation in price upward/downward will make infinite change in demand. It may become no demand or rush situation in the market depending upon whether price rises or falls for perfectly elastic commodities. The demand curve becomes parrallel to quantity supplied line.““After industrial revolution in England, mill clothes became very cheap in India. As a result handloom clothes which had high demand in market was not sold. In recent past potatoes and onion prices rose very much in different parts of India. So people stopped purchasing those products and switched over to other vegetables.During festival season there is heavy sale of garments as prices become low. People wait for their annual purchase during the season. Higher prices cause lesser sale during other times of year.When mutton prices increase poor people cannot afford it. So they switch over to eggs.In contrast in perfectly inelastic demand situation the demand curve becomes vertical to quantity supplied line. There will be no change what ever may be the price. Essential commodities, giffen or inferior goods come under the category. Let us say life saving drugs like insulin will not fall in demand following rise in price.
What are the factors affecting demand?
I just got out of an economics course and did well in the course. Demand is the relationship between price and quantity demanded, ceteris paribus. Price is the amount of money that must be paid for a unit of output, Quantity demanded is the amount consumers are willing and able to buy at a particular price during a particular period of time. Ceter paribus is the latin for other things equal which is a popular word in economics. Goods and service or determinants effected by demand are: taste; income; price of other goods-substitute or complement; population of potential buyers; and expected price Decreases or Increases can cause the demand curve to shift it depends on how the goods are affected.
Home building industry price elasticity of demand elastic or inelastic?
I have been searching for an explanation of what this even means and I cannot find anything that is helping me. Can someone please help me. I need to take the home building industry and focus on how it is affected by the economy. I also need to know if it is elastic or inelastic and what the price elasticity of supply for this industry is. I really appreciate any help I can get. Thanks!!!