After you have worked through this section of the learning unit, you should be able to:
- identify the factors that cause a change in demand
A change in demand occurs when there is a change in any of the non-price determinants of demand.
These are factors such as:
- the tastes and preferences of households
- household income
- the number of potential buyers
- the price of related goods
- other factors such as the weather and expected prices
Any change in any of these non-price factors of demand will cause a shift of the demand curve. This is because at every price, the quantity demanded will change.
Do the following activity to see if you still remember what causes a change in demand:
The rightward shift of the demand curve from D to D1 is the result of a(n) _____
An increase in supply causes a rightward (or downward) shift of the supply curve.
A rightward shift represents an increase in demand. In other words at each price a higher quantity is demanded.
A decrease in supply is represented by a leftward shift of supply curve.
A decrease in demand is represented by a leftward shift of the demand curve. In other words at each price a lower quanity is demanded.
Which of the following factors would explain a shift of the demand curve from D to D1? Select all of the answers that are relevant.
- An increase in the number of suppliers
- An increase in the number of households
- A decrease in the price
- A decrease in income
- A decrease in the cost of production
- An increase in the taste and preference for the product
b and f will cause an increase in demand.
The rightward shift could be the result of any factor that increases the demand. In this case, both an increase in the number of households and an increase in the taste and preference for the product would increase the demand for it.