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.
Identify any two (2) determinants of demand and any two (2) determinants of supply.
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