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Demand Shifters

(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. I ncome of Buyers.

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Demand Shifters

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  1. (INSECT) Demand Shifters

  2. 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.

  3. Income of Buyers • As income goes up, people will demand more of most goods at every price, shifting out demand.

  4. Inferior Goods • The exception to this tendency occurs with inferior goods • “Inferior” doesn’t mean worse, it means cheaper.

  5. Normal Goods • Goods whose income tends to increase with income levels are called “normal goods.”

  6. 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.

  7. 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

  8. 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?

  9. 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.

  10. Tastes and Preferences • Cars • Food • Shoes • Music • And on and on. . .

  11. 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? Tastes and Preferences

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