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FACTORS AFFECTING DEMAND, 4-2, P.P. 95-99 MAIN IDEA: THERE ARE A NUMBER OF FACTORS THAT CAUSE DEMAND TO EITHER INCREASE OR DECREASE. CHANGES IN THE QUANTITY DEMANDED • INCOME EFFECT-WHEN PRICES DROP, CONSUMERS HAVE EXTRA REAL INCOME. • SUBSTITUTE EFFECT-THE PRICE OF AN ITEM CAN CAUSE CONSUMERS TO SUBSTITUTE ONE PRODUCT WITH ANOTHER SIMILAR BUT CHEAPER ITEM (BUTTER AND MARGARINE) CHANGE IN DEMAND • CONSUMER INCOME-CAN GO UP OR GO DOWN. • CONSUMER TASTES-OFTEN CHANGE (FASHION ETC.) ALSO CHANGES IN TECHNOLOGY (CALULATORS NOW, SO SLIDE RULES DON’T SELL) HEALTH CONCERNS (CIGARETTES, FATTY FOODS ETC.) CHANGES IN DEMAND (CONT’D) • SUBSTITUTES-CAN BE USED IN PLACE OF OTHER PRODUCTS (BUTTER/MARGARINE OR SODA/FRUIT DRINKS). • COMPLEMENTS-THE USE OF ONE GOOD INCREASES THE USE OF ANOTHER (COMPUTERS/SOFTWARE OR PEANUT BUTTER/JELLY CHANGES IN DEMAND (CONT’D) • CHANGES IN EXPECTATIONSWEATHER FORECAST BAD YEAR FOR CROP OR A HURRICANE, SO PEOPLE STOCK UP BEFORE THEY BECOME SCARCE. • AN INCREASE IN THE NUMBER OF CONSUMERS