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Name some factors that can cause a shift in the demand curve in markets for goods and services.

Short Answer

Expert verified

The factors that cause a shift in the demand curve in the market for goods and services are

  • Income
  • Changing Tastes and Preferences
  • Changes in the size of population
  • Changes in the price of related goods
  • Changes in future prices or other factors

Step by step solution

01

Income

When the income of a customer grows, the demand for goods and services also grows and the demand curve moves rightward. On the other hand, when the earnings of a customer drop, the demand for goods and services also falls and demand curve shifts leftward.

02

Changing Tastes and Preferences

Differences in taste and choices vary the quantity demanded of a good at every cost and thus, shift the demand curve. For sample: because of the result of western civilization in India, people's affections are switching more towards western cloths.

03

Changes in the size of population

Change in the arrangement of the population also moves the demand curve leftward or rightward. For example: In a society with a relatively more female population will have more demand for goods like makeups. The demand curve for these goods will move rightward.

04

Changes in the price of related goods

The demand for goods and services can also be influenced by the shifts in the prices of corresponding goods. These goods can be replacement goods or complementary goods.

Substitute goods: These are the goods and services which can be utilized in place of different goods and services. When the cost of a substitute good gains, the demand for other goods gains. For example, tea and coffee are substitute goods. When the price of coffee gains, the demand for tea gains.

Complementary goods: These are the goods that are utilized jointly and generally, consumption of one good cannot be feasible without another good. For example car and petrol. If the cost of petrol grows, the demand for cars drops, and, if the price of petrol drops, then demand for cars grows.

05

Changes in future prices or other factors

Anticipations about prospective prices also impact the amount demanded. For example: assume the price of sugar. If individuals are wishing today that the cost of sugar will rise in the future, then demand sugar gains today. This generates a rightward shift in the demand curve of sugar today.

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Most popular questions from this chapter

  1. Many changes are affecting the market for oil. Predict how each of the following events will affect the equilibrium price and quantity in the market for oil. In each case, state how the event will affect the supply and demand diagram. Create a sketch of the diagram if necessary.
    a. Cars are becoming more fuel efficient, and therefore get more miles to the gallon.
    b. The winter is exceptionally cold.
    C. A major discovery of new oil is made off the coast of Norway.
    d. The economies of some major oil-using nations, like Japan, slow down.
    e. A war in the Middle East disrupts oil-pumping schedules.
    f. Landlords install additional insulation in buildings.
    g. The price of solar energy falls dramatically.
    h. Chemical companies invent a new, popular kind of plastic made from oil.

Table 3.8 shows the information on the demand and supply for bicycles, where the quantities of bicycles are measured in thousands.

a. What is the quantity demanded and the quantity supplied at a price of \(210?

b. At what price is the quantity supplied equal to 48,000?

c. Graph the demand and supply curve for bicycles. How can you determine the equilibrium price and quantity from the graph? How can you determine the equilibrium price and quantity from the table? What are the equilibrium price and equilibrium quantity?

d. If the price was \)120, what would the quantities demanded and supplied be? Would a shortage or surplus exist? If so, how large would the shortage or surplus be?

What is the difference between the demand and the quantity demanded of a product, say milk? Explain in words and show the difference on a graph with a demand curve for milk.

Review Figure 3.4 again. Suppose the price of gasoline is \(1.00. Will the quantity demanded be lower or higher than at the equilibrium price of \)1.40 per gallon? Will the quantity supplied be lower or higher? Is there a shortage or a surplus in the market? If so, of how much?

Consider the demand for hamburgers. If the price of a substitute good (for example, hot dogs) increases and the price of a complement good (for example, hamburger buns) increases, can you tell for sure what will happen to the demand for hamburgers? Why or why not? Illustrate your answer with a graph.

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