Copyright 2004 – Biz/ed The Market Mechanism VCE Business.

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Presentation transcript:

Copyright 2004 – Biz/ed The Market Mechanism VCE Business

Copyright 2004 – Biz/ed Demand and Supply How do we end up with a price for a good or service? it is set by the level of demand and supply in the market depends on how much of the product consumers want to and are able to buy and how much firms are willing or able to sell

Copyright 2004 – Biz/ed Factors Affecting Demand The price of the product usually, when a good’s price falls, more will be bought Income consumers’ incomes influence their demand for goods and services

Copyright 2004 – Biz/ed Factors Affecting Demand Price of other goods demand for one product can often depend on the price of another Tastes and fashion people’s demands change over time as fashions change

Copyright 2004 – Biz/ed Factors Affecting Demand Advertising consumers can be informed about new or improved products persuasive messages can boost demand

Copyright 2004 – Biz/ed Demand Changes With Price

Copyright 2004 – Biz/ed Factors Affecting Supply The price of the product generally the higher the price that a firm can get for its products, the more it will offer for sale Costs of production if a firm’s costs fall, it can supply more of its products

Copyright 2004 – Biz/ed Factors Affecting Supply Prices of other goods the price of alternative products affects the quantity supplied of others Technology advances in production techniques can fuel greater supply of some products

Copyright 2004 – Biz/ed Supply Changes With Price

Copyright 2004 – Biz/ed Putting Demand and Supply Together The market price can be seen at the point where the demand and supply lines cross:

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