Price Supply and Demand. 4 P’s…Prices in a Free Market Some companies have no control over the prices they can sell their good for if one product is the.

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Presentation transcript:

Price Supply and Demand

4 P’s…Prices in a Free Market Some companies have no control over the prices they can sell their good for if one product is the same as the next. Prices are determined by the forces of supply and demand. These businesses are known as Price Takers. Commodity products

4 P’s…Price; how to determine a price Demand= ‘the quantity that will be bought of a product at any given price. The lower the price the more will be demanded ’

Product pricing…Demand This demand curve shows that as the price falls more will be demanded. Demand increases Price

FACTORS AFFECTING DEMAND Price of product Prices of complementary products Price of substitute products Factors affecting demand Advertising Consumers Income Taste & Fashion

4 P’s…Price; how to determine a price Supply = ‘the quantity that businesses will produce at any given price. The higher the price the more the incentive to produce the product’.

Product pricing…Supply This supply curve shows that the higher the price the greater the incentive for producers to make and sell. Supply increases Price

FACTORS AFFECTING SUPPLY Price of product Price of raw materials Wage Rates Factors affecting supply Improved technology Climate (for agricultural products) Taxes & Subsidies

Product pricing…Price determination Equilibrium the point at which the demand and supply curves cross indicating the price at which what is offered for sale (supply) equals the amount that customers want to buy (demand). Supply increases as prices raise Demand increases as price falls

Product pricing…Price determination This demand and supply curve shows equilibrium. This is the point at which the demand and supply curves cross. Equilibrium indicates the price at which what is offered for sale (supply) equals the amount that customers want to buy (demand). Supply increases Demand increases

Product pricing…Supply of Oil Supply increases Price

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