Economics: Demand and Supply Shifters

Shifters of Demand

• Taste and Preference: Changes in consumer preferences can significantly affect demand for goods and services.
• Number of Customers: An increase or decrease in the consumer base can lead to increased or decreased demand.
• Price and Related Goods: Demand can be influenced by changes in the prices of substitute or complementary goods.
• Income: Consumer income levels directly impact their ability to purchase goods; higher income can increase demand for normal goods and decrease demand for inferior goods.
• Future Expectations: Anticipations regarding future prices or availability can influence current demand levels.

Shifters of Supply

• Price/Availability of Resources: The cost and availability of inputs affect producers' ability to supply goods.
• Number of Producers: An increase in producers leads to a greater supply in the market.
• Technology: Advancements in technology can enhance production efficiency, increasing supply.
• Government Action: Taxes can decrease supply, while subsidies can encourage greater production.
• Expectations of Future Profit: Expectations regarding future profitability can lead suppliers to adjust current supply levels, either increasing or decreasing based on anticipated market conditions.

Demand

• Represents the consumer's willingness to pay for a specific good or service.
• An inverse relationship exists between price and demand; as prices rise, demand typically falls, and vice versa.

Supply

• Indicates the total amount of a specific good or service available to consumers.
• Supply can be analyzed at a specific price or over a range of prices, often visualized through a supply curve on a graph.

Test your knowledge on the 5 shifters of demand and supply in this flashcard quiz. Understand concepts like consumer preferences and the impact of technology on production. Perfect for economics students seeking to reinforce their learning.