Identify any two (2) determinants of demand and any two (2) determinants of supply.
Two determinants of demand are:
1. Price of the Good: The price of a good or service is one of the key factors that affects demand. Generally, as the price of a good decreases, the demand for it increases, and vice versa (known as the law of demand). This inverse relationship between price and quantity demanded is due to consumer behavior and the perception of value.
2. Consumer Income: The income of consumers also plays a significant role in determining demand. As consumers' income increases, their purchasing power and disposable income rise, leading to increased demand for goods and services. Conversely, if consumers experience a decrease in income, their ability to buy goods and services may decrease, resulting in a decrease in demand.
Two determinants of supply are:
1. Cost of Production: The cost of producing goods or services is a crucial determinant of supply. Higher production costs, such as wages, raw material prices, or energy costs, can lead to a decrease in supply as producers may find it less profitable to supply goods at higher costs. Conversely, if production costs decrease, suppliers are more likely to increase their supply.
2. Technological Advancements: Technological advancements can also significantly impact supply. The introduction of new technologies often leads to increased efficiency and productivity in production processes, lowering costs and increasing supply. For example, advancements in automation can reduce labor costs and improve production efficiency, thereby increasing the quantity of goods supplied to the market.
Two determinants of demand are:
1. Price of the Product: The price of a product is one of the most significant determinants of demand. Usually, as the price of a product decreases, the quantity demanded increases, and vice versa. This relationship is known as the law of demand.
2. Consumer Income: Consumer income also affects the demand for goods and services. Higher consumer income generally leads to increased demand for normal goods (goods for which demand increases as income increases), while demand for inferior goods (goods for which demand decreases as income increases) may decrease as consumer income rises.
Two determinants of supply are:
1. Cost of Production: The cost of producing a good or service directly affects the supply. If the cost of production increases, suppliers may decrease the quantity supplied, as it becomes less profitable. Conversely, a decrease in production costs can lead to an increase in supply.
2. Technological Advances: Technological advances can significantly impact the supply of goods and services. New technologies can reduce production costs, increase efficiency, and enable suppliers to produce more output. As a result, technological advancements tend to increase the supply of goods.
Two determinants of demand are:
1. Price of the Product: The price of a product is the primary factor influencing the quantity demanded. As the price of a product decreases, demand generally increases, and vice versa, assuming all other factors remain constant.
2. Consumer Income: Consumer income also plays a significant role in determining demand. When consumers have higher disposable income, they are more likely to purchase goods and services, leading to an increase in demand. Conversely, if consumer income decreases, demand may also decrease.
Two determinants of supply are:
1. Cost of Production: The cost of production directly affects the supply of goods and services. When production costs, such as labor, raw materials, or technology, increase, suppliers may reduce the supply of a product to maintain profitability. Conversely, if production costs decrease, suppliers may be able to increase their supply.
2. Technological Advances: Technological advancements can significantly affect the supply of goods and services. Improved technology often leads to increased production efficiency, reducing costs and allowing suppliers to increase supply. Conversely, if technology becomes outdated or less efficient, it may decrease the supply.