Market prices depend on the levels of supply and demand. These supply and demand levels rise and fall according to a number of factors, and they can have a big impact on the success of a business.
A market is any place where buyers and sellers meet to trade products. The market price is the amount customers are charged for items and depends on demand and supply.
Prices change when supply and demand patterns change...
Price change affect a firm's costs. When the price of commodities such as oil and electricity increases, a business finds its own costs of production rise. Higher costs are either:
- Demand - The amount of a product customers are prepared to buy.
- Supply - The amount of a product businesses are willing, and able, to sell.
Prices change when supply and demand patterns change...
- An increase in demand following a successful advertising campaign usually causes an increase in price.
- An increase in supply when a new business opens usually causes a fall in price.
Price change affect a firm's costs. When the price of commodities such as oil and electricity increases, a business finds its own costs of production rise. Higher costs are either:
- Passed on to the consumer in the form of higher prices.
- Absorbed by the firm. This leaves prices unchanged but means lower profit margins for the company.
