Question

what are the determinants of demand and supply​

Answer 1

The Five Determinants of Demand :

• The price of the good or service.
• The income of buyers.
• The prices of related goods or services—either complementary and purchased along with a particular item, or substitutes and bought instead of a product.
• The tastes or preferences of consumers will drive demand.
• Consumer expectations.

DETERMINANTS OF SUPPLY :

1. Production cost:

Since most private companies’ goal is profit maximization. Higher production cost will lower profit, thus hinder supply. Factors affecting production cost are: input prices, wage rate, government regulation and taxes, etc.

2. Technology:

Technological improvements help reduce production cost and increase profit, thus stimulate higher supply.

3. Number of sellers:

More sellers in the market increase the market supply.

4. Expectation for future prices:

If producers expect future price to be higher, they will try to hold on to their inventories and offer the products to the buyers in the future, thus they can capture the higher price.

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