A change in demand can affect both the price and quantity of a good or service.
1. Price: When there is an increase in demand, the price of a product tends to rise. This is because the demand for the product exceeds its supply, leading to a scarcity and a potential increase in the price. Conversely, when there is a decrease in demand, the price tends to fall. This is because there is an excess supply of the product, leading to a reduction in the price to attract buyers.
2. Quantity: An increase in demand generally leads to an increase in the quantity of a product that is produced and sold. This is because producers respond to the increased demand by increasing their production levels to meet the market requirements and maximize their profits. On the other hand, a decrease in demand usually results in a decrease in the quantity of a product being produced and sold. This is because producers scale back their production to avoid excess inventory and potential losses.
Overall, a change in demand can result in a change in both the price and quantity of a product as producers and sellers adjust their strategies to match the demand fluctuations in the market.
How does a change in demand affect price and quantity
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