Final answer:
Consumers must have an unfulfilled desire for a product and the ability to purchase it. Preferences, price, and information are factors that influence purchasing decisions and shape demand.
Step-by-step explanation:
In order for a market to exist, consumers must have an unfulfilled desire for a product and the ability to purchase it. Preferences, price, and information are all factors that influence consumers' purchasing decisions and shape their demand for a particular product.
Preferences refer to what people like, and they can be influenced by various factors such as advertising, new experiences, or social trends. For example, if people hear positive reviews about a product, they might develop a preference for it and demand more of it. On the other hand, negative information or experiences may decrease demand.
Price is another crucial factor in influencing demand. According to the law of demand, consumers will buy more of a product when its price is lower and less when its price is higher. Income also plays a role in demand, as an increase in income often leads to an increase in demand for most goods and services.
Lastly, information about a product's price and quality is important for a market to reach equilibrium. When buyers and sellers have full information, they can make informed decisions and engage in transactions more efficiently. Limited information can hinder transactions and potentially lead to poor decision-making.