If you bought any good or service this week, you have already participated in th

Question

If you bought any good or service this week, you have already participated in the market system that operates by demand and supply. What drives the demand for any product? Why are firms willing to supply it?

Use the key word ECONOMIC NEWS in an Internet search engine (Google, Bing, etc.) to locate an appropriate news story or article that illustrates the ideas presented in the reading for this week.

Write a 3 to 5 paragraph summary of the information and also explain how it relates to what you have just learned. Do not copy and paste directly from the article except for small quotes that help explain your summary.

Explanation / Answer

The demand for a product will be influenced by several factors:

Price
Usually viewed as the most important factor that affects demand. Products have different sensitivity to changes in price. For example, demand for necessities such as bread, eggs and butter does not tend to change significantly when prices move up or down

Income levels
When an individual%u2019s income goes up, their ability to purchase goods and services increases, and this causes demand to increase. When incomes fall there will be a decrease in the demand for most goods

Consumer tastes and preferences
Changing tastes and preferences can have a significant effect on demand for different products. Persuasive advertising is designed to cause a change in tastes and preferences and thereby create an increase in demand. A good example of this is the recent surge in sales of smoothies!

Competition
Competitors are always looking to take a bigger share of the market, perhaps by cutting their prices or by introducing a new or better version of a product

Fashions
When a product becomes unfashionable, demand can quickly fall away.

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