Supply and Demand

Supply and Demand — page 5 — Customers often line up outside Apple stores so that they can be among the first to get the latest version of the iPhone or other new products a measure of how many products or services are bought at what prices during a certain period of time It is also how a measure of how much a consumer wants a product or service Demand is only limited by how much the consumer can and is willing to pay for something Consumers choices about buying or not buying a product or service make economic economic growth and expansion possible If no one wanted anything anything there wouldn’t be any use in making things to sell to them Fortunately for the economy people are hardly ever satisfied with what they have and most consumers want more and more 8

Supply and Demand — page 6 — We Demand It THE DETERMINANTS OF DEMAND Demand isn’t as simple as people wanting things There are five reasons why they might want something something and each reason affects demand in a different different way These reasons are called determinants When farmers have an excellent crop of oranges there may be more than people actually want to buy They may have to sell the fruit for a lower price The first determinant is price what it costs to buy a product or a service This is the most important determinant determinant of demand If something something costs a lot of money there isn’t going to be as high of a demand for it Some people people might find a way to buy something expensive but others others will not buy it because they can’t afford it or prefer to use their money for something else The second determinant is the price of related goods and services that are purchased along with the original item or that are substitutes for it For example gas is a related good 9

Supply and Demand — page 7 — Even the best car isn’t any good without gasoline to make it run Gasoline is a related good that is purchased along with the car for a car Related goods and services can also be purchased instead of the original item For example a cell phone that is less expensive than the most popular model is a related good The third determinant of demand is the income of the person who is buying the product or service The consumer consumer could be a teenager with a limited weekly allowance or a multimillionaire with an unlimited amount of money to spend The fourth determinant is buyer preference People don’t always like the same things Some people like things that are very modern and high-tech Others like homemade or one-of-a-kind items Some like to wear jeans and t-shirts and others prefer suits One person might want to have his 10

Supply and Demand — page 8 — We Demand It or her car professionally washed and waxed while another might prefer to buy the products needed and do it herself Expectations are the fifth determinant of demand If consumers think that the value of something is going to rise they will demand more of that product or service This is a little bit of a gamble because values don’t always rise Many people buy houses because they believe a house will be worth more money in the future However sometimes houses go down in value and people can’t sell a house for as much money as it cost to buy it On a smaller scale some people buy collectible items such as movie memorabilia Many people buy collectible Star Wars figures hoping that in years ahead the figures will increase in value and can be sold at a profit 11

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