ROLE OF PRICES

HOW DOES SUPPLY EFFECT EQUILIBRIUM

• An increase in supply would lower demand and equilibrium price
• A decrease in supply would raise demand and lower the equilibrium price

HOW DOES DEMAND AFFECT EQUILIBRIUM

• Increase in demand lowers the amount supplied and the price
• A decrease in demand raises both the amount supplied and the price

HOW DO PRICES AFFECT CONSUMERS

• Prices affect the amount that consumers demand.
• With the rise/fall of demand, the supply curve also changes

HOW DO PRICES AFFECT BUISNESSES

• The price affects businesses by making them vary the amount they supply
• The amount of supply also affects the amount demanded