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Market (Demand (The non-price determinants of demand (Other factors (The…

- - - - When the price of a product falls, then people will have an increase in their "real income", which reflects the amount that their incomes will buy. With this increase in real income, the people will be likely to buy more of the product.
    - - When the price of a product falls, then the product will be relatively more attractive to people than other products, whose prices have stayed unchanged, and so it is likely that consumers will purchase more of the product, substituting it for products that were previously purchased
  - - - Normal goods
        
        A good whose demand rises as income rises. The demand curve will shift to the right.
      - Inferior goods
        
        A good whose demand falls as income rises. The demand curve will shift to the left.
    - - Substitute goods
        
        Goods which can be used in place of each other. The change in the price of one of the products will lead to a change in the demand for the other product. Fall in price of chicken ➡️ fall in the demand for beef
      - Complementary goods
        
        Goods used in combination with each other. The change in the price of one of the products will lead to a change in the demand for the other product. Fall in the price of DVD players ➡️ increase in the demand for DVDs
      - Unrelated goods
        
        The change in the price of one product will have no effect upon the demand for the other product
    - - Demand depends upon the taste and preferences of a consumer. A change in taste and preferences affects the level of demand for various goods. Consumer's preferences may change because of changes in fashion, habits, and so on.
    - - If for some reason consumers expect prices of certain goods to rise in near future, they tend to demand more for it, in the present even at increasing prices.
        On the other hand, if they expect prices to fall in the near future, they will demand less of it in the present.
    - - The size of population
        
        E.g., if the population begins to grow, then it is logical to assume that the demand for most products will increase.
      - Changes in the age structure of the population
        
        E.g., if percentage of older people in economy starts to increase, then there may be an increase in demand for walking frames and a fall in demand for skateboards.
      - Changes in income distribution
        
        Relatively poor are better off and the rich slightly worse off ➡️ increase in the demand for basic necessity goods
      - Government policy changes
        
        Changes in direct taxes, e.g. taxes on incomes, may effect the money that people have to spend, and thus their demand. Also, government policies such as compulsory seat belts, would affect sand in the relevant markets.
      - Seasonal changes
        
        Changes in seasons may lead to changes in the pattern of demand. E.g., there will be more demand for warm coats in the winter and less demand for swimsuits
- - - - If there is an increase in the cost of a factor of production, such as a wage increase in a firm producing textiles which is labour-intensive, then this will increase the firm's costs, meaning that they can supply less.
    - - Often, producers have a choice as to what they are going to produce. E.g., a producer of roller skates may also be able to produce skateboards with a minimum change in production facilities. In this case, if the price of skateboards rises, because there is more demand for them, then it may well be that the producer will be attracted by the higher prices and aim to supply more skateboards and fewer roller skates.
    - - Improvement in the state of technology ➡️ increase in supply
        Backward step, such as natural disasters ➡️ decrease in supply
    - - Producers who expect the demand for their product to ride in the future may assume that the higher demand will lead to a higher price. If it is possible to store the product they might then withhold the product from the market in order to be ready to be able to supply more in the future, to gain from the higher price.
        If market research suggest that demand for a product will fall in the future then producers will be likely to reduce their supply of the product.
    - - Indirect taxes
        
        Indirect taxes are taxes in goods and services that are added to the price of a product.
      - Subsidies
        
        Payments which are made by the government to firm's that will, in effect, reduce their costs.