Determinants+of+Demand


 * Determinants of Demand**

· A decrease in demand will shift the demand curve to the RIGHT · An increase in demand will shift the demand curve to the LEFT

· Example: If more people want to buy chairs then the demand will increase. · A decrease in the number of buyers will DECREASE demand · An increase in the number of buyers will INCRESE demand · Example: If people decide they don’t like chocolate ice-cream then the demand will decrease. · A decrease in preference for good will DECREASE demand · An increase in preference for good will INCREASE demand // a. Substitute // · Example: If you like both Pepsi and Coke the exact same, and the price of Pepsi increases, you will buy Coke. Therefore the demand for Coke will increase. · A decrease in the price of a substitute good will DECREASE demand for the other good · An increase in the price of a substitute good will INCREASE demand for the other good // b. Complements // · Example: If the price of computers increases then the demand for keyboards will decrease. · A decrease in the price of a complement good will INCREASE demand for the other good · An increase in the price of a complement good will DECREASE demand for the other good · Example: If the income, buying power, of the consumer increases then demand will increase. · A decrease in consumer income will DECREASE demand · An increase in consumer income will INCREASE demand · Example: If the consumer expects the prices of gas to increase, demand will increase right now. · An expectation of LOW future prices will DECREASE demand at present time · An expectation of HIGH future prices will INCREASE demand at present time · Example: If the quality of the iPhone increases, then the demand curve will also increase. · A decrease in quality will DECREASE demand · An increase in quality will INCREASE demand
 * 1. Number Of Buyers **
 * 2. Change In Preferences **
 * 3. Price Of Related Goods **
 * 4. Change in Income **
 * 5. Expectations of Future Changes (Income and Prices) **
 * 6. Change in Quality **

The graph below shows both an increase and decrease in demand. The shift from D1 to D2 is a decrease in demand. The shift from D1 to D3 shows an increase in demand.

References: [] Principles of Microeconomics McGraw-Hill Ryerson Pg. 48 Class Notes