The lower prices tend to affect the demand, it will increase the demand.
Further Explanation:
Equilibrium price:
The equilibrium price is the price where the demand and supply are equal at a particular price. If the price of the good increases, the demand for the product will decrease. If the price of the good decreases, the demand for the product will increase.
As the price of the good is lower, the good is available in less amount of money. The customer has a fixed income, now they can purchase the more quantity of good with his fixed income. As the price of the good is more, the good is available in more amount of money. The customer has a fixed income, now they can purchase the less quantity of good with his fixed income.
Let us take an example, a pen costs $5, in the market. A customer has a $50 fixed income, he can purchase 10 units of pen from the market. Let us assume a pen cost will decrease from $5 to $2, in the market. A customer has the same $50 fixed income, now he can purchase 25 units of a pen from the market.
Therefore, the price and demand of the goods have an inverse relationship with each other.
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Answer details:
Grade: Middle School
Subject: Economics
Chapter: Demand
Keywords: The lower prices, tend to affect, demand, increase, equilibrium price, a pen costs $5, increase, decrease, market, inversely, less amount of money.