INSECT DEMAND SHIFTERS AKA DETERMINANTS OF DEMAND Demand

(INSECT) DEMAND SHIFTERS

AKA DETERMINANTS OF DEMAND � Demand shifters, or determinants, are any factors that if changed, will cause the demand curve to shift out / right / up or in / left / down. Shifters will cause people to demand MORE or LESS of the good AT ANY PRICE.

INCOME OF BUYERS � As income goes up, people will demand more of most goods at every price, shifting out demand.

INFERIOR GOODS The exception to this tendency occurs with inferior goods � “Inferior” doesn’t mean worse, it means cheaper. �

NORMAL GOODS � Goods whose income tends to increase with income levels are called “normal goods. ”

NUMBER OF BUYERS As the number of buyers increases, so will the demand for a good. Since more will be demanded at every price, the entire demand curve will shift to the right. � Works in reverse, too. �

SUBSTITUTES The demand for a good can shift when the PRICE of its substitute changes. � The relationship between an increase in price of one good and the demand for its substitute is positive �

EXPECTATION OF FUTURE PRICE/INCOME Demand will shift as people anticipate more or less income, or when they expect prices to go up in the immediate future. � What would you do today if you heard that the price of gas will be $4. 00/gallon by Friday? �

COMPLEMENTS The demand for a good can shift when the PRICE of its complement or substitute changes. � The relationship between an increase in price of one good and the demand for its complement is negative. �

TASTES AND PREFERENCES Cars � Food � Shoes � Music � And on and on. . . �

TASTES AND PREFERENCES � Tastes and preferences change with trends, innovation and additional information. � They also result from cultural and geographic differences. What would you do if you lived in a country where gas cost $10. 00 a gallon, and parking spaces were scarce?