2.1 Demand

Consumers decide whether to buy a particular good or service and, if so, how much to buy based on its price and on other factors, including their incomes, the prices of other goods, their tastes, and the information they have about the product. Government regulations and other policies also affect buying decisions. Before concentrating on the role of price in determining quantity demanded, let’s look briefly at some other factors.

Income plays a major role in determining what and how much to purchase. People who suddenly inherit great wealth might be more likely to purchase expensive Rolex watches or other luxury items and would probably be less likely to buy inexpensive Timex watches and various items targeted toward lower-income ...

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