PRICE SYSTEM

1.    Demand  is the willingness and ability to buy a product at various prices per period of time.

·       Law : when the price increase demand will decrease

So as price decrease demand will increase

·       Factors that effect demand :
-    Change in price

when the price increase the demand will deacrease so as the price decrease the demand will increase.

-    Advertising

 advertising effect people attractiveness to buy the product.

-    Change in population
      as the rate of population is high demand might higher also

-     Change in taste and fashion

as the taste and fashion change, demand on a product will also change. For example : clothes.

·       *Demand diagram*

·       Factors that causes shift in demand curve :

-         Financial ability to pay for the product

-         The attitude towards the product itself

-         The price of the product

2.    Supply is the willingness and ability to sell or supply a product at various prices per period of time.

·       Law : when the price Ý supply will Ý

And so when th price Þ supply will Þ

            ·       Factors effecting supply :

-         The cost of supplying the product

-         The type of industries

$ joint supply = a product can produced more products. Such as a cow, it can produce milk, cheese, leather, meat, etc.

            ·       *Supply diagram*

Elasticity (Responsiveness)

·      A numerical measure of responsiveness of one variable following a change in another variable or ceterus paribus.

·      Elastic : a small change in price produces a bigger change in the quantity demanded

·      Inelastic : a large change in price produces a bigger change in the quantity demanded

·     Elasticity are differentiate into 3 types ;

-         Price elasticity of demand (PED)

-         Income elasticity of demand (YED)

-         Cross elasticity of demand (XED)

# PED :  when the price falls = demand will expand

                  When the price rise = demand will contract

-         PED VALUES ; 0 = demand in perfectly inelastic means demand does not change when the price changes

-         0-1 = demand is inelastic means change in demand is smaller than the change of it’s price

-         1 = unit elastic means demand change the same as the change in price

-         More than 1 = demand is elastic, means demand change more than change in price

‘ the concept of PED is almost the same with PES, while PED measure the responsiveness of demand to a changes in price so PES measure the responsiveness of supply to a changes In price’

• PED can be determines by :  

-         Number of substitute goods

-         Cost of switching between products

-         Peak and off-peak demand

-         The time period allowed following a price change

-         Whether the good is subject to habitual consumption

-         The strength of the brand loyalty to a product

# YED : change in quantity demand

Change in income

- the result will be superior if it’s positive and inferior if it’s negative

#XED : change in quantity demand A

                Change in price B

-         If the result is positive it means the product is substitute good and if it is negative it means the product is complementary good