Law of Demand
The law of demand states that quantity purchased varies inversely with price.
In other words, the higher the price, the lower the quantity demanded. But other factors have to kept constant, like:
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- Price of substitute goods
- Consumers’ taste and preference
- Income of consumer
- Future expectations
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Law of Supply
Keeping other factors constant, as the price of a commodity
increases, its supply increases.
Other factors have to be kept constant, like:
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- Cost of production (Wages, interest, rent etc)
- Production capacity can be changed in the short term.
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