Chapter 2 - Pricing Theories

How Markets Work

• DEFINITION OF DEMAND

- The willingness and ability of buyers to buy product or services . So consumers must have money to buy product .

• The law of demand

-When the price of product increase, the quantity demanded will decrease and When the price of product decrease, The quantity demanded will increase .

• DETERMINANTS OF DEMAND

a ) Price of related goods -  The demand for a product is affected by a change in price of related      goods

1. Substitute Good
2. Complementary goods

B ) Consumers Income - When the income increase , consumers demands for goods and services  will increase

C ) Taste and Fashion 

D ) Population

E ) Price expected

• DEFINITION OF SUPPLY

- The willingness and ability of producer to make offer or service

• The law of Supply 

-  When the price of product increase , the quantity supplied will increase and When the price of product decrease , The quantity supplied will decrease .

• DETERMINANTS OF SUPPLY

1 ) Price of related goods - The supply of product can be influence by the price of related goods

• Substitute Goods
• Complementary Goods
• Cost of production
• Expected future price
• Number of seller