Monday, November 17

Demand and Supply for Capital

Demand for capital:
The demand for capital will increase if:

  • Lower interest rate
  • Expect poor future business conditions => less investment

Supply for capital
The supply for capital will increase if

  • Higher interest rate => more savings
  • Higher current income => more savings
  • Lower expected future income => more savings

Other factors affect demand and/or supply for capital

  • Population changes
  • Technological changes
  • Expectations

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