Answer to Question #189406 in Microeconomics for zain ul abdeen

Question

Discribe the factors that can effect demand and supply,what are there impacts on market equilibrium.

Answer 1

1.Price of the product

There is an inverse or negative relationship between the price of a product and the amount of that product customers are able and willing to buy. Customers want to buy more of a product at a low price and less of a product at a high price. 

Once the price of a product decreases, the product's quantity demanded will increase until equilibrium is reached. Hence, surplus drives price lower. If the market price is below the equilibrium price, quantity supplied is less than quantity demanded, creating a shortage.

2. Improvements in technology, reduction in the prices of factors and resources used in the pro­duction of a commodity or lowering of excise duty on a commodity also leads to the increase in supply of the commodity.

Increase in technology will lower the equilibrium price and quantity.