Question

When do the laws of supply and demand have less effect on prices (1 point)

1. when a good or service is new*
2. when outside factors cause changes
3. when buyers search for substitutes
4. when sellers want to make more money

Answer 1

The laws of supply and demand are less effective on pricing when external factors cause changes in the market, leading to shifts in the supply and demand curves.

Step-by-step explanation:

The laws of supply and demand have less effect on prices when outside factors cause changes. These outside factors, or exogenous factors, can include changes in tastes, population, income, prices of substitutes or complementary goods, and expectations about future conditions and prices, as well as shifts in input prices, natural conditions, technology, and government policies like taxes, regulations, or subsidies. When these factors are at play, the supply and demand curves themselves shift, which can lead to a different quantity being demanded or supplied than would occur based purely on the traditional supply and demand model. This means that the prices are influenced by these external elements rather than the direct interaction between buyers and sellers in the market.

Answer 2

here is an inverse relationship between the supply and prices of goods and services when demand is unchanged. If there is an increase in supply for goods and services while demand remains the same, prices tend to fall to a lower equilibrium price and a higher equilibrium quantity of goods and services.