Shifters of Supply and Demand

Shifters of Demand

•Tastes

•Income

•Prices of Related Goods

•Consumer Expectations

•Number of Buyers

Shifters of Supply

•Resource Prices

•Technology

•Taxes and Subsidies

•Prices of Other Goods

•Producer Expectations

•Number of Sellers in the Market

Tastes (demand)

A change in consumer tastes (preferences) for a product—a change that makes people want to buy more of a product

Number of Buyers (demand)

More people in an area means demand goes up as well

Income (demand)

If people make more money, they spend more

If people make less money, they spend less

Prices of Related Goods (demand)

Compliments: Goods people buy together so the price of one affects the price of the other.

Ex. The price of strawberries goes down, so the demand for whipped cream goes up

Substitutes: When the price of one good goes up, people will buy something similar that is cheaper.

Ex. The price of Lays potato chip goes up, so you buy Ruffles chips instead because they are cheaper

Consumer Expectations (demand)

We adjust our purchases according to our expectations

Ex.- If we want to buy a pair of shoes today but know they will be on sale next week, we will wait to buy them so they will be cheaper

Resource Prices (supply)

if the price of a resource used to make your product goes up, your supply will go down

Taxes and Subsidies (supply)

Either make it harder or easier to produce

Subsidy- (easier) helps businesses ie. struggling small business

Taxes- (harder) added costs for the business

Prices of other Goods (supply)

If producers can make more money making ITEM B, they will stop making ITEM A and start making ITEM B.

EX: The price of cupcakes increases, so a baker will stop making cakes and start making cupcakes

Producer Expectations (supply)

future expectations of prices effects supply

If a producer thinks the demand for something will go later, then they will decrease their supply today.

EX: Black Friday- expecting more buyers means you supply more

Number of Sellers (supply)

more sellers equals more supply; less sellers equals less supply

Technology (supply)

if something is easier to produce, producers will supply more.