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- Hi there, I'm a fellow consumer like every other person in our community. And I'm here to tell you how Supply and demand affect your financial decisions
- First off let learn more about supply and demand. Supply is the amount of goods or services that the producer has made available for consumers purchase. Consumers is a person who purchases goods and services. While producers manufactures goods and services.
- Demand is the consumers desire to buy a specific good or service. The interaction of Supply & Demand determine the price of a resource. The price is the given value of a good or service.
- Consumer sovereignty is how consumer control to output of goods and services. The more consumers want of a certain good or service the higher the demand which will affect the supply. This can cause a certain good or service to have a higher price than others.
- This might cause consumer to have a choice. Choice is the decision a consumer has to make because services and goods are limited.
- Now, you might be asking. How does this affect my financial decisions? The answer is consumer sovereignty.
- An example on how supply & demand affect financial decisions is, consumers want more red apples than green apples. But the producer can't produce enough red apples. Because of this it causes the price of red apples go up while the green apples price goes down. Now you as a consumer has to make the choice of purchasing a red apple for a higher price or a green apple for a lower cost.
- This might cause a consumer to buy one product rather than another. This might because of better quality, price or incentives. Incentives is a promise to motivate consumers to buy a certain product. But when you chose something else you might lose something from the other product, this is called opportunity cost.
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