factors` affecting demands and supply

            factors` affecting demands and supply. Price: The higher the price of any commodity, the lower the quantity that will be demanded and vice versa.

  1. The price of other commodities: This applies to commodities that have close substitutes. If the price of such a commodity is high, the consumer may demand for the close substitute.

  1. Income of the consumer: The higher the income of a consumer, the higher the quantity of commodities that he/she will demand and vice versa.

  1. Changes in taste of consumer: If consumers change their taste for a particular commodity, the demand for that commodity will also change
  2. Population: Increase in population in an area will lead to high demand for commodities and vice versa.

  1. Periods of festival: It is well known that people demand for more of specific commodities during certain festivals.
  2. Expectation of changes in price: If people expect that there will be high prices of commodities in the nearest future, demand will increase and vice versa.

  1. Taxation: An increase in taxation means a reduction in purchasing power of the consumers which may result in decrease in the demand for certain commodities.
  2. Changes in fashion: As fashion changes, people’s demand for the reigning fashion also changes.

  1. Weather and climate: Variations in weather and climate or season may affect the demand for certain commodities. For example, rain coat, umbrella and rain boots, are highly demand during raining season.

  1. Government policy: Government policy over the consumption of some commodities may either encourage or discourage the demand for such commodities.
  2. Advertisement: A good advertisement for a commodity can lead to an increase in demand for it and vice versa.

Factors Affecting Supply

  1. Price: The higher the price of any commodity, the higher the quantity will be supplied and vice versa.
  2. Level of technology: Improved techniques reduce cost per un product and increase output or supply

  1. Cost of production: If the co production increases, the producer to produce less of a commodity.
  2. Government policy: Govern policy, e.g. subsidy given to farm* the form of free importation of equilibrium can lower production cost and increase supply.

  1. Weather: If the weather of a
  2. particular area is favourable at a particular more agricultural products will produced and their supply to the will increase.
  3. Taxation: An increase in taxation materials used in production discourage production thereby leading reduction in supply and vice versa.

  1. Price of other commodities: The supply a of a commodity will be affected if the prices of other commodities rise price of a substitute like maize increase the quantity of rice produced will fall.
  2. Number of producers: If the number of producers of a commodity in there will be a corresponding increase quantity supplied.
  3. Natural disasters: A plague of in flood, war, drought or fire will negatively affect the supply of a commodity.

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