factors of demand

DEMAND:   Demand of a good or service always has many factors affecting it. The factors can be income, presence of substitute and complementary goods and even due to the customer choice.

The income level of consumers will affect the demand for a product. When the level of income increases the demand also  increases.Other than that, when a good or service is replaceable with its substitutes, the price increase in one product, ceteris paribus, will cause the increase the demand for the other. For example, many consumers would prefer McDonald over Carl’s Junior due to the price for Carl’s Junior is very high. Therefore, the demand for McDonald increases. In addition, when a good or service is complement to the other, when the price on one product falls, the demand for the complement product increases. For example, if the price of McValue meal of Filet-O-Fish decreases, the demand of the complement product which is fries and coke will increase as well. McValue meal comes with burger, fries and coke. Therefore, the demand of the complement product increases. When the level of income decreases, the demand will also decrease. In example, when a boy receives RM6 from his parents as allowance, he buys 1 Filet-O-Fish burger which costs Rm6 but when his allowance is RM 12, he can buy two Filet-O-Fish burgers which cost Rm12. Thus, the demand for Filet-O-Fish burger increases.

SUPPLY:the theory of supply states that other things remain the same ,the higher the price of goodsthe greater is the quantity supplied and lower the price of the good the smaller is the quantity.

In the mainlands of China the Mcdonalds (corp) increased the price of every meal from 0.5 yuan to 1 yuan.this was not an affect that occured in other  countries.The reason  for this increase in the price is mainly due to food inflation.Mcdonalds already has 1000 outlet in China but want to still increase the restaurant numbers to 150-175 more .The rise in  price of the meals have let to increase in the production of goods.Increase in the production of goods is caused as their is an increase in the price of raw materials ,this has lead to increase in the supply of goods.