Which is a key determinant that affects both supply and demand?

Market size is a significant determinant affecting both supply and demand. When the market size increases, there are typically more consumers in the market, leading to a higher overall demand for goods and services. This increased demand can encourage producers to expand their supply to meet the needs of the larger market. Conversely, if the market size decreases, the overall demand may drop, prompting suppliers to reduce their output.

This interplay between market size and the behaviors of both consumers and producers illustrates its dual influence. For example, a growing population or an influx of new customers into a region can stimulate demand, while simultaneously prompting businesses to ramp up their supply capabilities to capitalize on this demand growth. This close relationship shows how market size serves as a key determinant of both supply and demand in an economy.