Price, income, expectation, and substitutetability are the four main determinants for demand. The current price of the asset will affect these factors differently. Firstly, an increase in price will decrease demand for the asset because many people cannot afford it. This could lead individuals to invest in cheaper alternatives instead. Additionally, this change could potentially have psychological consequences as well – leading investors to become wary about investing in such expensive assets and thus impacting their overall investment decisions.
A rise in the price of an investment may cause people to reconsider their future expectations. Investors may lose confidence if prices rise higher than expected, and instead look for other investment opportunities. Finally, with increased prices buyers will be more cautious when considering purchasing any item – meaning they may take longer to assess each possible purchase before making a decision or look at alternatives which offer improved value for money. Prices that are too high can lead to an overall decline in demand or the elimination of some assets.