Identify and explain the main economic factors that affect the demand for a product; the supply of a product and the resulting product price. The main economic factors that affect the demand of a product Price Price is considered the most important factor that affects demand; higher the price of a product, lower the demand and vice versa. Income levels Changes in income levels determine the buying power of an individual, thus an increase in income levels increases their ability to purchase goods and services. Thus the demand for a product will increase. Consumer tastes and preferences As society evolves, the tastes and preferences of consumers change too. Changes in fashions and trends cause the demand of a particular product to increase or decrease. Competition The existence of a similar product in the market by some competitor can decrease the demand for that product, especially if the competitor is offering a lower price or better quality/additional features. Population Size: Population determines the market size for a product, thus an increase in population will result in a rise in demand and vice versa. Taxation Policies: Taxation policies affect the final price of a product and also the net income of the buyer. An increase in income tax causes a decrease in demand as people will have less money left and vice versa. Similarly, lower taxation on goods causes the final price of the product to be lower so a larger percentage of people can afford it causing a higher