Chapter 3: Problem 23

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

Short Answer

Expert verified

Factors causing shifts in the demand curve for goods and services include: 1) changes in income, 2) population changes, 3) shifts in tastes and preferences, 4) prices of substitute goods, 5) prices of complementary goods, 6) consumer expectations about the future, and 7) government policies such as taxes and subsidies.

Step by step solution

1. Income

A change in the level of income for consumers can cause a shift in the demand curve. If people have more income, they are able to buy more goods and services, and the demand curve will shift to the right. Conversely, if people have less income, they will buy fewer goods and services, causing the demand curve to shift to the left.

2. Population

An increase in the population, such as through immigration or a baby boom, can cause the demand curve to shift to the right as more people are available to consume goods and services. Conversely, a decrease in population would cause the demand curve to shift to the left.

3. Tastes and Preferences

If the tastes and preferences of consumers change, it can affect the demand for a product. For example, if a certain style becomes popular, the demand for that style will increase, shifting the demand curve to the right. On the other hand, if that style goes out of fashion, the demand will decrease, shifting the demand curve to the left.

4. Prices of Substitute Goods

When the prices of substitute goods change, it can affect the demand for a good. For example, if the price of tea decreases, some people may switch from drinking coffee to tea, causing the demand for coffee to decrease and its demand curve to shift to the left.

5. Prices of Complementary Goods

A change in the price of a complementary good can also affect the demand for another good. For example, if the price of smartphones decreases, the demand for mobile phone cases may increase as more people can afford smartphones, shifting the demand curve for mobile phone cases to the right.

6. Consumer Expectations

Expectations about the future can affect the demand for a good. For example, if consumers expect that prices for a particular product will rise in the future, they may purchase more of that product now, causing the demand curve to shift to the right.

7. Government Policies

Government policies, such as taxes and subsidies, can also cause shifts in the demand curve. For example, if the government implements a tax on sugar, the demand for sugar-containing products may decrease, shifting the demand curve to the left. Conversely, if the government provides a subsidy for renewable energy, the demand for renewable energy products may increase, shifting the demand curve to the right.

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