4 factors that may shift the demand curve

Main factors that affect the quantity demanded

• P : Price of substitutes

  • If the price of a substitute were lowered, demand for a product would fall. Demand curve will shift to the left.

• A : Advertising

  • If goods are advertised more heavily, the quantity demanded is likely to increase. Although spending in advertisement will help increase demand, increasing in advertising expenditure will cause the demand curve to shift to the right.

• I : Income

  • Disposable income rises, demand for goods will also rise. When wages and salaries rise, consumers tend to buy expensive things/brands or new things.

• D : Demographic changes

  • World’s population growth which increase the demand for goods and services

    • For example: age distribution ( more demand for retirement homes, health care) , more women than men ( more demand for women clothing) , ethnic group ( demand for products associated with their culture)

• F : Fashion and tastes

  • Consumer taste and fashion changes over time

  • It can be influenced by social changes

  • Different seasons have different fashions

• P : Price of complements

  • Purchased together by consumers

  • For example: consumers of cornflakes will also buy milk. If the price of milk were to rise, the demand for cornflakes may fall.

Inferior goods

Goods for which demand will fall if income roses or rise if income falls

Normal goods

Goods for which demand will increase if income increases or fall if income falls

Substitute goods

Goods bought as an alternative to another but perform the same function

Complementary goods

Goods purchased together because they are consumed together