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What are the factors affecting the law of supply and demand?

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What are the factors affecting the law of supply and demand?

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  1. Manipulation .


  2. Law of supply and demand is a limited version of great laws: Law of Conservation and Law of Equilibrium. At any point of time, value of demand in money terms = value of supply in money terms and value of demand in commodity terms is equal to value of supply in commodity terms. This is Law of Conservation. If quantity of demand increases, its value in supply terms falls and prices rise. But remember that this is corrected by Law of Equilibrium by movement of wealth from higher concentration to lower concentration.

  3. The demand for goods depends on income and income is earned by producing goods, that is supply, so for the economy as a whole  supply=demand in equilibrium. However which goods are in demand depends on the income distribution. There would be little demand for luxury goods if no one was rich and little demand for inferior goods if no one was poor. That is the choice of  goods and services to produce  is effected by income distribution in a country.

  4. Supply and Demand





    The ''law of demand'' states that, all other variables remaining the same, the higher the price, the less the quantity demanded.

      Fred the butcher notices that when the price of beef is $6 per kilogram, 150 kilograms are bought each week. When the price of beef is $8 per kilogram, 100 kilograms are bought each week.

    The ''law of supply'' states that the higher the price of a good or service, all other variables remaining the same, the greater the quantity is supplied.



    When the price of beef is $6 per kilogram, Fred the butcher will supply 50 kilograms per week. When the price of beef rises to $8 per kilogram, Fred will supply 100 kilograms per week.

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