Micro 2.6-Why Demand is Downward and Supply is Upward

Higher quantities yield higher costs.

More efficient firms can sell at lower prices.

Few people have lots of income.

Many people have little income.

Law of Diminishing Marginal Utility (Happiness).

As price of a good increase, buyers can substitute in other goods.

As prices fall, people become buyers as they are NOW able to afford a good.

As prices rise, consumers are forced to pay more of their real income to the good.

As price falls, we can now satisfy our unsatisfied wants

Firms have to maximize their profits and minimize their losses.