Download NONPRICE DETERMINANTS or FACTORS THAT AFFECT DEMAND

NONPRICE DETERMINANTS or FACTORS THAT AFFECT DEMAND
The information that follows will allow you to identify and analyze the effect of certain
non-price determinants or factors on the demand for a product. Each numbered item is a
non-price determinant of demand (something other than the price of the good itself).
1. the number of buyers in the marketplace
______ #
______D
______ #
______D
Relationship: _______________________
2. the taste and preferences of consumers
______ T/P
______D
______ T/P
______D
Relationship: _______________________
3. the income of consumers
______ I
______D
Relationship: _______________________
______ I
______D
exception: inferior goods (bread, potatoes, beans, and cabbage in lieu of meat;
margarine in lieu of butter)
______ I
______D (inferior)
Relationship: _______________________
______ I
______D (inferior)
4. expectations about the future
expectations about FUTURE prices
______ E(p)
______ E(p)
______D (current)
______D (current)
Relationship: _______________________
expectations about FUTURE income
______ E(I)
______D (current)
Relationship: _______________________
______ E(I)
______D (current)
5. prices of related goods
A. substitutes (goods use in place of each other)
hamburger
tea
cornflakes
bus
___________________________________________
___________________________________________
___________________________________________
___________________________________________
Coke (good)
Pepsi (substitute)
______ P (s)
______D (good)
Relationship: _______________________
______ P (s)
______D (good)
B. complements (goods consumed or purchased together; if you buy one, you will
more than likely buy the other)
peanut butter
hamburger patties
razor
paper cup dispenser
___________________________________________
___________________________________________
___________________________________________
___________________________________________
______ P(c)
______D (good)
______ P(c)
______D (good)
C. independent goods
Relationship: _______________________
Relationship: _______________________
Summary: A change in any of the five non-price determinants of demand will result in a
change in demand. This means that the quantity demanded at EACH AND EVERY PRICE
will change. A change in demand is illustrated graphically by a shift in the demand curve
to the left or to the right.
Illustrate shifts in the demand curves:
P
P
Q
D
Q
D
A change in price will result in a change in __________________________; this
relationship can graphically illustrated by ____________________________ the
demand curve. A change in non-price determinants of demand will result in ______________; the resulting relationship can be graphically illustrated by a
____________ in the demand curve.