Question

How do lower prices tend to affect demand

Answer 1

When the price is lower, with a condition other factors remain equal, the more people would buy the product. That means the demand would increase. When the price increases, fewer people would buy the products, means the demand would decrease.

Further explanation

In the market, supply and demand always shift until the market finds the equilibrium price. Equilibrium is the condition when demand meets supply and the price stabilize. Multiple factors can affect both supply and demand This factors included consumer preferences, product substitutes, the price of the complementary product, production cost, supply chain and the number of competitors.

The law of demand explains when the price goes up, people will less likely to buy the product, it means that the demand will decreases. In other words, the higher the price, the lower the quantity demanded. On the other hand, the law of supply stated when the price of goods increase, so the supply will increase too. It because by selling at a higher price will increase revenue.

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Keywords: demand curve, prices, supply, demand, equilibrium, law of demand and supply

Answer 2

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.  

Learn more:

1. Learn more about consumer influence

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2. Learn more about equilibrium price

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3. Learn more about consumer protection law

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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.