A simple supply and demand schedule is shown in Figure 1.2 on page 7 of your textbook. You should be familiar with the general appearance of the supply and demand schedule. The ability of our business to influence supply and demand depends greatly on the type of competition it faces. Assume that because it is easy to open a taco stand there are many producers of tacos. There is no difference between our tacos or service and any other taco stand.
All advertising is equal.
Since our tacos are identical to every competitor s tacos, if we raise the price above the market equilibrium price we will sell fewer tacos. Consumers will buy from someone else. If we lower our price we won t make a profit. We are in a state of perfect competition, forced to sell at the market equilibrium price. On the other extreme are monopolies.