Question

Question: Identify and evaluate the effects of changes in supply and demand on businesses and consumers in a market economy.

Answer 1

Supply and demand are the two factors that determine pricing in the big picture of a competitive economic market. In other eords, The two influence each other and impact prices of consumer goods and services within an economy.

The supply side of the theory refers to how much of a product a business owner can supply to buyers and at what price.It is the amount of a particular good or service available at a given time to consumers.

The law of demand states that, all other factors being equal, demand will be reduced as the price of a product is raised.Consumers, expressing interest in purchasing a good or service, exhaust available supply, generally resulting in an increase in demand.

The effects of supply and demand mean that businesses have to keep an eye on two different forces that can affect the prices they will be able to command. On the demand side, an increase in demand will raise the price, and vice versa.

On the supply side, an increase in supply (such as new competitors entering the market) will force the price downward, while a reduction in supply will push prices upward.

There is an inverse relationship between the supply and prices of goods and services when demand is unchanged.

supply and demand are equally important to economic vitality.