Factors Affecting Supply Curve vs Demand Curve

  • TRIBE - What shifts Demand curve

  • Tastes and Preferences

  • What people like/want/value

  • Related Goods

  • (substitutes or complements)

  • substitutes

  • goods you buy instead of the other (coke or pepsi)

  • if coke price skyrockets, consumers just flock over to buying pepsi instead, meaning demand for pepsi shifts right

  • complements

  • goods that are consumed together (hot dogs and hot dog buns)

  • if hot dog prices drop, demand for hot dog buns automatically shifts right too (even though price of buns didnt change)

  • Income

  • how much money buyers have

  • Normal Goods: goods you buy more of when you get richer (new cars, steak, etc)

  • Inferior Goods: goods you buy less of when you get richer (ramen, bus tickets, etc)

  • Buyers (num of consumers)

  • literal population size in the market

  • Demand for basic necessities shifts Right when Buyers count increases

  • Expectations (consumer)

  • what buyers think will happen to the price or availability in the future

  • e.g. a rumor that a good will spike in price will shift current Demand Right

  • RATNEST - What Affects the Supply Curve

  • Resource Prices (Input Costs)

  • the cost of the Factors of Production (Land, Labor, Capital) needed to make a certain good

  • increase in resource prices makes Supply shift Left (decrease in Supply)

  • Alternative Output Prices

  • other goods that a business could make with the same machinery or land

  • like if a farmer has a field and can grow wheat or corn, and corn price shoots up, he will prioritize corn over wheat heavily, dropping the Supply of wheat (Left shift)

  • Technology

  • better tools, processes, etc that make production more efficient

  • better tech : Supply shifts Right

  • Number of Sellers

  • how many competitors in the market

  • more sellers : total market Supply shifts Right

  • Expectations (producer)

  • what sellers think will happen to prices in the future

  • if a company’s analysists predict an upcoming shortage causing a spike in their prices, they will halt sales and store their product to make a killing during that shortage

  • so Supply shifts Left bc they’re intentionally withholding inventory for the future

  • Subsidies

  • govt financial aid given to a business

  • artificially lowers company’s costs

  • lower costs means they can produce more

  • Supply shifts Right

  • Taxes (& regulations)

  • govt imposed financial penalties or compliance costs (expenses made just to follow regulations) on businesses

  • they act like an increase in resource prices

  • they subtract from profit margins

  • makes it more expensive to do business

  • Supply shifts Left