We look at markets where many buyers and sellers interact, and show how the Competitive Market price is determined by both the preferences of consumers and the costs of suppliers. When there are many firms producing the same product, each firm’s decisions are affected by the behaviour of competing firms, as well as consumers.
The demand curve represents the willingness to pay (WTP) of buyers; similarly, supply depends on the sellers’ willingness to accept (WTA)
Supply Curve
Demand Curve
Case & Discussion
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If something has become more expensive then it is likely that more people are demanding it, or the cost of producing it has risen, or both. By finding an alternative, the individual is saving money and conserving society’s resources.
When a user’s intrinsic needs remain unchanged, any external factor that raises the cost of meeting those needs beyond what the user can bear will compel them to seek alternative ways to fulfill their needs.