Factors Causing the shift in Demand CurveFactors Causing the shift in Demand Curve

The Law Of Demand States the inverse relations between price and quantity demanded,other things remaining the same .When There is Change in Factors other than price,the whole demand curve Shifts Rightward Or Leftward.In Other words,these other factors determine the position and level of the demand curve. In this Article will talk about Factors Causing the Shift In Demand Curve.

7 Factors Causing the shift in Demand Curve

Here are 7 Factors Causing the shift in Demand Curve are as follows:

Income of customer

Demand for the commodity changes with the change in income of the consumer. In the case of normal goods, when income of the consumer rises, the demand also increases. As a result, the whole demand curve shifts rightward. But in case of inferior goods, demand decreases with the rise in income. There exists inverse relationship between income and demand for the inferior goods. Hence, the whole demand curve shifts leftward with the increase in income of the consumer.

Also Check: What is Demand? Function,Difference between Desire and Demand.

Price of the related goods

When the prices of the related goods change, the demand curve will shift either leftward or rightward. There are two types of related goods:

a.Substitute goods

Two goods are said to be substitute goods, if the rise in price of one good causes increase in demand for other good. For example, tea and coffee. If price of tea rises, the demand for coffee will increase and vice-versa. This shows that when price of a commodity rises, demand for its substitute good increases and hence the demand curve will shifts rightward and vice-versa.

Also Check : 5 Types Of Demand In economics

b. Complementary goods

Two goods are said to be complementary, if rise in price of one good causes decrease the demand for other good. For example, pen and ink. In other words, complementary goods are those which are jointly used to satisfy a want. If price of a pen decreases, the demand for ink will increase and vice-versa. This shows that when price of a commodity rises, demand for its complementary good decreases and hence the demand curve will shift leftward and vice-versa.

Also Check: Law of Demand| Meaning,Definitions,Schedule & Assumptions

Tastes and Preferences of the consumer

Individual preferences and tastes have a huge impact on customer demand in economics. When customer preferences shift, it has a direct impact on the demand for goods and services. When demand rises, the demand curve moves to the right, suggesting a bigger amount demanded at each price level.

If demand falls, the demand curve moves to the left, suggesting a lesser amount requested at each price level. This link between customer preferences and demand is a key idea in economics, indicating how market dynamics adapt to changes in what consumers seek and value.

Also Check : Exceptions to the Law of Demand

Advertisement

There is great importance of advertisement to influence demand for a good. Goods which are widely advertised become popular. From advertisement people can take information about various goods and they demand more quantities of them. Hence, increase in expenditure on advertisement will shift the demand curve rightward and vice-versa.

Also Check :Causes of Downward Sloping Demand Curve

Population

Population growth leads to increased demand for various goods and services. However, it is not just population that matters; Demographic composition also plays a critical role in determining demand. Population composition refers to the distribution of people at different ages, including the proportion of young people, the elderly and children, as well as the proportion of men and women. Changes in the structure of people can have a big impact on the demand for different products.

For example, a growing population can lead to a demand for housing, education and recreational services. On the other hand, an aging population may lead to increased demand for health services and retirement-related products.

In addition, the ratio of men and women in society can affect the demand for specific products that are tailored to different needs and preferences.

Also Check : Derivation Of an Individual Demand Curve

Change in income Distribution

Distribution of income in the society also affects the demand for goods. If the distribution of income is more equal, the propensity to consume of the society will be relatively high. If the distribution of income is more unequal, then the propensity to consume of the society will be relatively low. If income distribution is in the favour of rich, demand will be low, as their saving will be high. If income distribution is in the favour of poor, demand will be high since their saving will be low.

Also Check : Movement along Demand Curve and Shift in Demand Curve

Expectation

Consumers’ expectation of further rise in price in the near future will increase demand for the commdity as they want to escape from the pinches of high prices. On the other hand, consumers’ expectation of further fall in price in the near future will decrease demand for the commodity as they want to enjoy more commodity at lower prices.

Also Check: Difference Between Movement and Shift in Demand Curve

Similarly, expectation of further increase in income will increase demand for a normal good and vice-versa. In the same way, the expectation of future shortage for a commodity also increases its demand.

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