When there is a decrease in demand what happens in the market?
It means the prices will go down. This is a fundamental (and fairly simple) economic concept known as supply and demand. If there is greater demand than there is supply, prices go up. If there is a greater supply than there is demand, prices go down. It should however be noted that supply and demand does notdetermine the price of a commodity, rather, it causes the price to fluctuate around a perceived value.A market is any arrangement that enables buyers and sellers to get information and do business with each other.A competitive market is a market that has many buyers and many sellers so no single buyer or seller can influence the price.The money price of a good is the amount of money needed to buy it.The relative price of a good-the ratio of its money price to the money price of the next best alternative good-is its opportunity cost.If you demand something, then you:§ Want it,§ Can afford it, and§ Have made a definite plan to buy it.Wants are the unlimited desires or wishes people have for goods and services. Demand reflects a decision about which wants to satisfy.The quantity demanded of a good or service is the amount that consumers plan to buy during a particular time period, and at a particular price.What Determines Buying Plans?The amount of any particular good or service that consumers plan to buy is influenced by1. The price of the good,2. The prices of other goods,3. Expected future prices,4. Income,5. Population, and6. Preferences.The Law of DemandThe law of demand states:Other things remaining the same, the higher the price of a good, the smaller is the quantity demanded.The law of demand results froma substitution effectan income effectSubstitution effect-when the relative price (opportunity cost) of a good or service rises, people seek substitutes for it, so the quantity demanded decreases.Income effect-when the price of a good or service rises relative to income, people cannot afford all the things they previously bought, so the quantity demanded decreases.Demand Curve and Demand ScheduleThe term demand refers to the entire relationship between the price of the good and quantity demanded of the good.A demand curve shows the relationship between the quantity demanded of a good and its price when all other influences on consumers' planned purchases remain the same.A Change in DemandWhen any factor that influences buying plans other than the price of the good changes, there is a change in demand for that good. The quantity of the good that people plan to buy changes at each and every price, so there is a new demand curve.When demand increases, the quantity that people plan to buy increases at each and every price so the demand curve shifts rightward.When demand decreases, the quantity that people plan to buy decreases at each and every price so the demand curve shifts leftward.
