Question
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
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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