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Entrepreneurship 3209
We have discussed the role played by the
 Influence on Products
 Influence on Price
 Influence on Service
Pricing Power
Consumer Purchasing Power
The amount of a good or service that
consumers demand, the amount that
suppliers can supply, & the price all affect one
This is the relationship that we will now
Demand is the quantity of a good or service
that consumers are willing & able to buy at a
particular place
Since each of us have different needs & wants
and different levels of ability to pay for things,
we each have different demands
When we buy a particular good or use a
particular service, we are expressing a demand
for it
Usually, consumers buy more as price
decreases (increase demand) & buy less as
price increases (decrease demand)
law of demand: The economic principle that
demand goes up when prices goes down;
and, conversely, comes down when prices
go up
Consumer must be interested or aware of the
good or service (advertising & marketing plays a
role here)
Enough of it must be available
The price must be reasonable & competitive
It must be accessible to the consumer (location,
location, location)
Changing Consumer Income
Changing Consumer Tastes
Changing Expectations for the Future
Changes in Population
usually an increase in income means people
buy more.(cars, furniture, TVs)
For some types of goods the opposite may
be true
 Increased income may see a decrease
in grocery items because people are
buying more restaurant meals
Changes in consumer tastes over time can
cause an increase in demand for fashionable
items & a decrease in demand for what is
perceived as unfashionable
Jean styles come in and go out of fashion
regular intervals
if prices or income are expected to increase
consumers may purchase more now in
Upward change in expectations = increase
Reverse is true if the is a decrease in
expectations (demand will decrease).
Population increases creates need for more
houses, roads, cars, services, etc
We also find that as certain segments of the
population increases certain things increase
in demand.
 (Seniors in Canada are creating a demand for
health care, retirement homes, certain sporting
activities such as golf, etc )
If the goods & services consumers demand
can be provided at prices they are willing to
pay, businesses will supply them
Supply: The quantity (amount) of a good or
service that producers can provide
determined by the costs of producing it and
by the price people are willing to pay for it
Law of Supply: The economic principle that
supply goes up when prices goes up; and,
conversely, comes down when prices come
The cost of producing it
The price consumers will pay
Changes in the Number of Producers
Changes in Price
Changes in Technology
Changing Expectations for the Future
Changing Production Costs
An increase in producers will increase supply
– if demand remains the same, price will
If price reduces then people may stop
producing it. E.g. If cod prices fall, fishermen
will catch other fish
Changes in technology can reduce the cost of
production, encouraging more businesses to start
producing. E.g. CPU wafers, continually getting
smaller and smaller and are able to produce more
per wafer
Many producers attempt to predict economic
conditions and consumer demand for two to
five years in advance. E.g. Automobile
They increase or decrease supply accordingly
If a local baker owner finds a lower cost for
ingredients, they can produce more goods for
the same cost.
The opposite may be true as well, should the
supplier increase costs
Relating Price to supply and demand
 If demand is high while supply is low, prices tend to
be high
 If demand is low while supply is high, prices tend to
be low
Relating Price to supply and
 The equilibrium price :
When the quantity of
goods that a producer is
willing to supply at a
certain price matches the
quantity of goods that
consumers are willing to
buy at that price
What would you do if a good or service that you use
suddenly increases in price? Think about purchases to
meet both needs and wants.