Saturday, July 28, 2018

Why the Price of Air Conditioners is high in summer ?

Example on Price Mechanism:

In Summer everyone wants to buy A/C 's in order to protect themselves from the hot sun in the summer but during the summer the prices of A/C's will rise very high, we wonder why there is rise in price, the actual reason behind this during summer the demand of A/C's will be very high so there will be a shortage in the number of A/C's to meet the demand.So,the seller will increase the price of the AC's in order to decrease the demand so the demand will decrease gradually and the supply of A/C's will gradually increase and at some point  both Demand and Supply of A/C's will be equal where market of A/C's will be at equilibrium.


And the Factors of production also effects the price of the product, In view of the same example above In summer the demand of A/C's will be high, to meet the demand the producer tries to increase the demand in order to meet the demand, so the need of raw materials, workers and technicians will also increase which results in increase in their demand and by this there will be shortage of the factors which increase the price of the factors which leads to increase in price of the A/C's

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