Factors that cause a shift in demand and supply ( PASIFIC AND PINTWC)

PASIFIC AND PINTWC

Population

The higher the population you have the more people there will be who will be able to purchase a good at any given price leading to an outward shift in demand if population increases.

Advertising

If done successfully advertising increases the desirability of a product. As such more people will want to purchase the good at any given price and so if advertising is successful it will lead to an outward shift in demand.

Substitutes

A substitute is a good which a consumer could purchase over another good. As a result of these products being in competitive demand, the price of one good impacts the demand for the other.

(Disposable) Income

Generally when incomes rise the demand for goods rises as well. This is because when salaries and wages increase, people have more disposable income to spend on goods meaning that there will be more demand for a product at any given price, shifting the demand curve out. These goods are known as normal goods e.g. Audi car

Fashion and Trends

Over time demand patterns change due to fashion and trends. For example clothes which are in fashion one season and have a high demand might not be in fashion next season so the demand will decrease. If a good is in fashion its demand will increase.

Interest Rates

Interest rates can also affect the demand for a good. This is because some goods are purchased with borrowed money e.g. a credit card where the consumer has to pay interest to the lender. Therefore if interest rates decrease it becomes less expensive to purchase goods with borrowed money so more people will buy these goods and the demand for these goods will decrease, shifting the demand curve outwards

Compliments

Some goods are bought together. This is usually because they work well together. These goods are called complimentary goods e.g milk and cereal. As a result complementary goods are said to be in joint demand. As the price of one good increases the demand for the other good will decrease.

Productivity

Increased productivity causes the supply curve to move to the right because the average cost falls.

Indirect Tax

Taxes increase the cost of production which leads to the supply curve shifting to the left.

Number of Firms

The more firms there are, the larger the supply as more firms will leads to more units being supplied at every price, shifting the curve right.

Technology

The more advanced technology increases output, and therefore supply, moving the supply curve to the right.

Subsidies

Money given to fund the production of certian products by the goverment will reduce costs, and therefore increase supply, moving the supply curve to the right.

Weather

certian weather can increase or decrease the production. For example agricultural production will increase in the correct weather.

Cost of Production.

if the production cost decline, the firm will be more inclined and able to supply more, shifting the curve to the right.