When do the laws of supply and demand have less effect on prices?
a) when a good or service is new
b)when outside factors cause changes (my choice)
c) when buyers dislike the prices that sellers change
d) when sellers want to make more money
As a tutor, I think your answer, B, is the best one.
The laws of supply and demand typically have less impact on prices in certain situations. One of these situations is when outside factors cause changes. Specifically, when external factors such as government regulations, taxes, subsidies, or natural disasters disrupt the normal functioning of markets, the laws of supply and demand may not have as much influence on prices.
To understand why outside factors affect prices, it is essential to grasp the basic principles of supply and demand. The law of supply states that as the price of a good or service increases, producers are willing to supply more of it, ceteris paribus (all else being equal). Conversely, the law of demand states that as the price of a good or service increases, buyers are willing to purchase less of it, ceteris paribus. These two laws interact to determine the equilibrium price and quantity in a free market.
However, outside factors can disrupt this equilibrium. For example, if the government imposes regulations or taxes on a particular product, it can affect the cost of production or increase the final price for consumers. Similarly, if a natural disaster destroys a significant amount of supply, this reduced availability can lead to higher prices even if demand remains constant.
Therefore, when outside factors cause changes, the equilibrium between supply and demand can be disrupted, making the laws of supply and demand less influential in determining prices. This answer aligns with option b) when considering the given choices.