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Some Notes that you might find heplful: A change in one of the determinants also called factors, will cause a shift in either demand or

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Some Notes that you might find heplful:

A change in one of the determinants also called factors, will cause a shift in either demand or supply.

Determinants (Factors) of Demand

A change in a determinant will cause a "shift" in the demand curve.)

Market Size

(Population)

more buyers = an increase in demand

fewer buyers = a decrease

Expectation

(future price)

if a consumer expects the price to rise in the future, they will demand more now

Related Good

(price changes)

Substitutes - the demand for one good decreases because another good is used in its place (Pepsi vs Coke)

Complements - the demand for one good increases as a result of the purchase of another good (hamburgers and buns)

Income affects the demand for most goods and services

Normal good - the demand increases as income increases. (steak)

Inferior good - the demand decreases as income increases. (meat in a can)

Taste

Popularity decreases will decrease demand

Popularity increases will increase demand

Determinants (Factors)of Supply

A change in a determinant will cause a "shift" in the supply curve.)

Input (Resource) Cost

Wages and raw materials. When it cost more to produce, supply will decrease. When it cost less to produce, supply will increase.

Labor Productivity

If workers are able to produce more items in the same amount of time then supply will increase.

Number of Producers

More Producers = More Supply

Less Producers = Less Supply

Technology

Technological improvements will increase supply.

Taxes and Subsidies

Taxes are a cost of doing business. So, when the government increases taxes, supply will decrease. If governments should decrease taxes, then supply should increase.

A subsidy is when the government pays firms to produce more or less. The government pays farmers not to grow crops this reduces overall supply.

Expectations

If a producer thinks they can make more profit in the future, they will hold back supply now and then supply more later on. This can also work in reverse.

USE THE IMAGE BELOW TO ANSWER THE FOLLOWING QUESTIONS:

Answer Choice (E) - A change in the price of an item, other things constant, causes a movement along a curve, no shift will occur in either demand and/or supply. See the attached graph.

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