Effects of Demand and Supply in the Purchasing Power of the People

Consumer purchasing power measures the value of money with which the buyers or the consumers purchase
goods and services. Product or services is meaningless unless there are people to buy it, mainly it is because
they have the purchasing power. But there are lot of factors affecting the consumer’s purchasing factor; and
one is the supply and demand.

Supply and Demand, it is the relationship between the quantity of a commodity that producers wish to sell at
various prices and the quantity that consumers wish to buy. It is the model or the standard in the price
determination in the economic theory. In which the price of a commodity is determined by the interaction of
supply and demand in a market.

The consumer purchasing power is determined by the Consumer price index which connects to the Market
Equilibrium, or the balance between the supply and the demand; wherefore when buyers demand more
goods than the supply, they will tend to bid the price up. But, if they wish to purchase less than what is
available, then suppliers will bid the prices down.

High supply means lower price; and lower price means higher purchasing power

HIGH SUPPLY

LOWER PRICE = HIGH PURCHASING POWER

High demand means higher price; and higher price means lower purchasing power

HIGH DEMAND

HIGHER PRICE = LOWER PURCHASING POWER

REFERENCES:
https://www.smallbusinessbonfire.com/consumer-purchasing-power/
https://www.britannica.com/topic/supply-and-demand
https://www.encyclopedia.com/history/dictionaries-thesauruses-pictures-and-press-releases/consumer-
purchasing-power