Because people only buy a product if the benefit at least equals its cost, and because people's preferences vary widely, a lower product price will have a benefit worth the cost for more people, thus increasing demand. Demand determinants other than price include consumer preferences, income, prices of substitutes and complements, and the number of buyers.
Detailed Explanation: Buyers and sellers meet in the market to determine the price and quantity produced of a good or service.
If the supply remains constant, but non-price demand determinants increase demand, then the equilibrium price will rise, since the equilibrium quantity will also increase, and the suppliers will only supply more product at a higher price.
Send email to thismatter. The following diagrams shows how changes in non-price demand and supply determinants can change the market equilibrium.
If only prices change, then the law of supply and demand will cause both quantity and price to revert back to the equilibrium. Share with friends.
When the price of commodity increases, the sellers flock to the market with their products for an opportunity to earn higher profits. Market equilibrium occurs when the price at which the quantity suppliers are willing to produce equals the quantity buyers are willing to purchase.