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Trends Of The Modern World Economy

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The opportunity cost of investing in a business which generates a toxic substance is of important consideration. If the opportunity cost is higher then the risk should be taken, in this case, for the bottling water company the environmental risk is damage to environment due to plastic bottles, however the opportunity cost is higher than the total damage and hence environmental consideration cannot prevent the starting of this business, furthermore, money, less than the opportunity cost can be dedicated into research on biodegradable plastics. Demand can be defined as the ability or wiliness of consumers to purchase goods and services at a given price within a given time frame.

The demand graph or the demand schedule is a graphical representation of the effect of price on demand for goods and services holding all other factors constant, if the price of a commodity e. bottled water go up, then the demand for it will reduce and vice versa, the graph below illustrates this law of demand states that the increase in the price of commodities causes the corresponding decrease in the quantity demanded.

Decrease in price results to an increase in quantity demanded for a given product provided other factors remain constant. These represent the quantity of goods and services that a given producer or manufacturer is willing to bring to the market at a given price. Supply of commodities is greatly influenced by price of the commodity and other factors. The law of supply states that the quantity supplied increases as the price of the product increases holding all other factors constant. This is because the suppliers are able to get a higher profit margin.

This is the point where the supply and demand curve intersects; it is the equilibrium point such that the quantity supplied is enough to meet the demand of the consumers. Any deviation like increase in price lead to reduction in quantity demanded leading to surplus and consequent lowering of prices to equilibrium.

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