Reasons For Price Change

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The reasons for fluctuations in the change of prices can usually be well explained by analyzing the supply and demand model. When supply happens to increase, more quantities of the product being sold are manufactured, which in turn causes prices to decrease. The opposite occurs when supply decreases; prices increase when the quantity of the item being produced becomes lower. This is simply because the less availability there is of a product, the more rare it is, makes it more valuable since there are not enough for everyone to be able to purchase one. A good example of this are diamonds, a rare carbon mineral only found in very few places in the planet; thus making it a very expensive luxury. On the other hand, a product such as bread is much more readily available and common in most places in the world which makes it more affordable. Similarly, when the demand for a product becomes higher than before there are some consequences, such as the resulting rise in price for said product. The higher demand also causes the quantity produced to increase. The shifts of the supply curve and demand curve have predictable results in the changes in prices and quantity, and sometimes both simultaneously shift thus affecting these variables somewhat differently. One can see the effects of the supply and demand theory in various aspects of everyday life. Cars, food, houses, everything is affected by supply and demand. Many successful businessmen learn how to use this model to their advantage to raise their profits by lowering supply of their product, for example. Others are affected by season changes in preferences. A good example of this is the sale of swimsuits in the summer versus the winter. During the summer months the demand for swimsuits increases with the temperature, so a higher quantity of swimsuits are produced to be sold to the consumers. This rightward
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