PRINCIPLES OF ECONOMICS
INTRODUCTION TO THE PRINCIPLES OF ECONOMIC
Political Economy or Economics is a study of mankind in the ordinary business of life; it examines that part of individual and social action which is most closely connected with the attainment and with the use of the material requisites of wellbeing.
2. Demands
2.2. Effects of demad
The effects of demand on the market can significantly influence pricing, production, and overall economic activity. Here are some key effects:
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Price Changes: An increase in demand, assuming supply remains constant, often leads to higher prices. Conversely, a decrease in demand can cause prices to fall.
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Quantity Supplied: Higher demand typically encourages producers to increase the quantity supplied to meet consumer needs. If demand drops, producers may reduce their output.
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Market Equilibrium: Changes in demand can shift the market equilibrium point. An increase in demand raises equilibrium price and quantity, while a decrease lowers them.
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Consumer Behavior: Demand reflects consumer preferences and purchasing power, influencing market trends and business strategies.
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Economic Growth: Strong demand can lead to economic growth, as businesses expand production and hire more employees to meet consumer needs.
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Resource Allocation: Demand shifts can affect how resources are allocated in the economy, directing investment and production toward more in-demand goods and services.
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Inflation: Persistent high demand can contribute to inflation, as increased competition for goods drives prices upward.