The document discusses how demand and supply determine the price of goods and services in a market. It outlines several factors that affect demand, such as price, income, prices of other goods, tastes and fashion, and advertising. Factors affecting supply are also presented, including price, costs of production, prices of other goods, and technology. The document concludes that the market price is set at the point where the demand and supply curves intersect.

1. The Market Mechanism BTEC Business

2. Demand and Supply How do we end up with a price for a good or service? it is set by the level of demand and supply in the market depends on how much of the product consumers want to and are able to buy and how much firms are willing or able to sell

3. Factors Affecting Demand The price of the product: usually, when a good’s price falls, more will be bought Income: consumers’ incomes influence their demand for goods and services

4. Factors Affecting Demand Price of other goods: demand for one product can often depend on the price of another Tastes and fashion: people’s demands change over time as fashions change

5. Factors Affecting Demand Advertising: consumers can be informed about new or improved products persuasive messages can boost demand

6. Demand Changes With Price

7. Factors Affecting Supply The price of the product: generally the higher the price that a firm can get for its products, the more it will offer for sale Costs of production : if a firm’s costs fall, it can supply more of its products

8. Factors Affecting Supply Prices of other goods: the price of alternative products affects the quantity supplied of others Technology: advances in production techniques can fuel greater supply of some products

9. Supply Changes With Price

10. Putting Demand and Supply Together The market price can be seen at the point where the demand and supply lines cross: