Download Demand Shifters

Demand Shifters
(Price is not a demand shifter. Like a shift in Supply, price changes will not shift or
change demand, they will cause movement along the D-curve aka change in Quantity
demanded or change in Qd)
1. Buyers’ income (Level of GDP per capita aka PCI)
A change in Distribution of income can shift Demand. While level
of PCI would be assumed unchanged, if you were given:
“Income becomes more unequal” and good is: private helicopters
D increases.
But if you were given:
“Income becomes more unequal” and good is: Bargain retail (all
shopping at Wal-Mart, Ross, K-Mart)
D Decreases.
2. Buyers’ taste and preferences
Any medical advice to eat or consume a certain product ( or not do
so), advertising, fads/trends, religious or cultural changes that impact the
consumption of a good all fall under “tastes”
3. Price of complements and substitutes
4. Buyers’ expectations of future market conditions (especially the good’s
future price) but could be generally there outlook on the economy, jobs,
income, personal economic stability captured by a survey called consumer
confidence (cc)
5. Number of buyers in the market (aka size of the market)
For # of buyers, it could be described as a population (pop)
increase (or decrease). If US population increases, then you have to
assume D has gone up for all goods, including, say, software.
Also it doesn’t have to be the level of pop – it could be the makeup
of pop. If you are told that a demographic has changed (you then have to
assume level of pop – as anything else in the economy – is unchanged).
Example: “population is aging” and the good is health care
(increase in D)
“population is aging” and the good is video games
(decrease in D)
Supply Shifters
(Price is not a Supply shifter. Like a shift in Demand, price changes will not shift or
change Supply, they will cause movement along the S-curve aka change in Quantity
Supplyied or change in Qs)
(1) Level of Productivity, Technology, or Human Capital used in production
(more broadly, the method of production)
(2) Input prices (raw or intermediate materials that are needed to make output
are called “inputs”). This also refers to the cost associated with any of the
four “factors of production”. Also called resource prices. Usually would
be specific: A change in
Price of Oil
Employees Wages
Cost of buying or running a machine or Factory (Physical Capital)
(3) Prices of other goods (specifically, the prices of other goods that the firm
could produce instead).
(4) Expectations about future prices for the good
(5) The firm’s objective (e.g. profit maximizing or something else?)
(6) Number of firms in the industry; also might best be described as any of the
following - # of Suppliers/Producers/Resources