Skip Nav

What are the non-price determinants of demand and supply?

Categories

❶If desire for goods increases while its availability decreases, its price rises.

Who can edit:

Downloading prezi...
Report Abuse
Blog Archive

State of technology , as technology Improves- supply shifts to the right meaning more supply for cheaper prices Price of related goods: An increase in the price of a related good can influence the supply of the original good. Consider the tradeoff in the production of corn and wheat. If the price of corn rises relative to the price of wheat, it would probably be profitable to move resources from wheat production to corn production.

This will cause the supply curve of corn to shift to the right and the supply curve of wheat to shift to the left. Size of the market: Affecting mostly agriculture, long periods of rain or drought can influence the quantities of crop received at the end.

A sudden political or environmental situation may change the supply of currency. The non-price determinants of demand include: As income rises, demand for normal goods rises causing the demand curve to shift to the right. Yet the demand for inferior goods usually falls, demand curve shifts to the left. Consumer expectations of future: As far as changes in demand go, consumer income expectation is one of the most important things to keep an eye on.

When consumers expect their income to increase, companies will see an increased demand for goods, products, and services. Likewise, when consumers expect their income to decrease or cease entirely, they are less likely to be in the market for products, goods, and services, thereby decreasing the demand.

It is worth noting, however, that the effect over income on demand varies depending upon the product being sold. While the demand for expensive luxury food items may fall when consumer income falls, companies that sell low-quality, high-fat ground beef may see a sudden uptick in demand for their product, given the fact that the meat is inexpensive and filling.

These types of goods are called inferior goods. Although inferior goods are not always low-quality, they are generally the types of goods that will see an inverse relationship between customer income and product demand. Another important non-price factor that determines demand is the price of related goods. Substitute goods affect the demand of related goods when the supply increases or decreases.

Because substitute goods are used one in place of another, rather than together, the demand for one will always decrease when the demand for another increases. Unlike substitute goods, however, complementary goods affect the demand for related goods on an inverse scale.

Because complementary goods are used together rather than separately, the demand for complementary goods tends to increase in a side-by-side fashion. For example, a drastic decrease in gas prices will lead to an increase of cars on the road.

This, in turn, will lead to an increased demand for gasoline, coolant and engine oil, complimentary products to the gasoline itself. Consumer tastes and preferences play a large part in determining the level of demand for a given product. As trends, fads and styles change, consumer preference does, too.

This means that changing hairstyle preferences among women will also change the demand for related products, such as hairstyling equipment, products, accessories, and colors. When consumers expect the price of a given good to drop in the future, it is likely that the demand for said product will stall until the aforementioned drop occurs. Likewise, when the price of a product is projected to go up, the demand for that product will increase in anticipation of the increase.

Navigation menu

Main Topics

Privacy Policy

Similar to future expectations in demand. Demand increases when supply increases on specific goods. (Ex: heart shaped candies around January & February).

Privacy FAQs

It says that the quantity demanded of a product is a function of five factors: price, income of the buyer, the price of related goods, the tastes of the consumer, and any expectation the consumer has of future supply, prices, etc.

About Our Ads

The following list enumerates the non-price determinants of demand. These factors are important, because they can change the number of units sold of products and services, irrespective of their prices. An explanation of the different factors that affect the supply of a good or service, including price, input prices, technology and expectations. Let's look more closely at each of the determinants of supply. How Money Supply and Demand .

Cookie Info

What Are The Non-Price Determinants Of Demand. February 13th, Comments off Share | Tweet. Changes in the determinants of demand will cause the shift of the demand curve. Price normally demands the demand of goods and services. [ See Non Price Determinants Of Supply]. Another important non-price factor that determines demand is the price of related goods. Substitute goods affect the demand of related goods when the supply increases or decreases. Because substitute goods are used one in place of another, rather than together, the demand for one will always decrease when the demand for another .