The
shift of demand curve takes place due to a change in the other than price
factor which affect demand. The following diagrams show the changes
in demand due to other than price factor. D is the initial
demand and S is the initial
supply. Demand curve shifts from D to D1
Reasons
for shift of demand curve
There
are many “other than price factors which determine the demand”. They are
(1) Price of other goods – substitutes and complimentary goods (2)
income of consumers (3) expectation of future prices (4) Changes in
population structure and size. (5) Consumer preferences (6) Advertisements (7)
Interest rates and changes in credit facilities.
(1)
Price of other goods – (substitutes and complimentary goods). A substitute is a pair of goods which
are considered by consumer to be alternatives to each other. Regarding
substitute goods, when price of one goods goes up, the demand for the other
rises. A complimentary good is a pair of goods consumed or used
together. Regarding complimentary goods, when the price of
one good goes up the demand for both the goods fall.
(2)
Income of consumers. When income of the households raises their demand for
goods and service will also rise and vice versa. [With respect to
the basic necessities of people like food, there is an
exemption to this – Regarding basic necessities (especially food) as the
income increases the percentage amount spent will tend to decrease]
(3)
Expectation of future prices. When the consumers believe that prices will
increase in the future, they would buy the products immediately so as to
prevent paying a higher amount in future.
(4)
Changes in population structure and size. An increase in population would
increase demand for the products in general.
(5)
Consumer preferences. The liking or the taste of the consumers change all times
based on some style, colour, quality, design etc.
(6)
Advertisements. Awareness and the usefulness of a product or service is known
to the consumers by way of advertisements.
(7)
Interest rates and changes in credit facilities. Availability of credit
facilities and the rate of interest enable the consumers to buy
goods earlier, so that they can pay in easy installments in future.
Moreover
social and political factors are also affecting the demand to change. The
above factors may affect different countries or places in different manner, so
the resulting changes in prices are also will be different.
But
when considering the possible other than price factors influencing the demand
for a specific product may differ. For example, when considering the demand for
a house the factors are
1) level of (disposable) income, 2) price of houses, 3) condition/size of
houses, 4) location of houses, 5) knowledge about/advertising of houses
available, 6) associated fees, 7) taxation to be paid.
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