How do people’s ability to pay and willingness to buy affect demand?

by affecting how much of a resource people want
by increasing the amount of goods produced
by affecting the price of raw materials
by limiting the availability of a product

1 answer

People's ability to pay and willingness to buy primarily affect demand by affecting how much of a resource people want. When consumers have the financial capacity (ability to pay) and the desire (willingness to buy) for a good or service, this typically leads to increased demand for that product.

Here's how the other options relate:

  • By increasing the amount of goods produced: While higher demand can lead to producers increasing output, this is more of a response to demand rather than a direct effect of people's ability and willingness to pay.

  • By affecting the price of raw materials: The ability and willingness of consumers to pay can influence demand, which in turn can affect prices of goods, but it's more indirect than directly affecting raw material prices.

  • By limiting the availability of a product: This is generally a consequence of supply constraints rather than a direct effect of demand influenced by payment ability and willingness.

In summary, the key impact of ability to pay and willingness to buy is on the demand for products based on consumer preferences and financial capacity.