Download factors affecting demand, 4-2, pp 95-99

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