The price is the most important influence on the amount of any product purchased. But economists know that other factors can and do affect purchases. These factors, called determinants of demand are assumed to be constant when demand law is discussed. When any of these determinants changes, the demand curve will shift to right or left.
a) Tastes: A favourable change in consumer tastes for a product
or a change that makes the product more desirable means that more of it will be
demanded at each price. Demand will increase; the demand curve will shift
rightward. An unfavourable change in consumer preferences will decrease demand,
shifting the demand curve to the left.
b) Number of
buyers: An increase in the number of
buyers in a market increases demand. A decrease in the number of buyers in a
market decreases demand.
c) Income: If consumers’ income rises, demand for commodities
will also rise and if income decreases, demand will also decrease. Products
whose demand varies directly with money income are called superior goods or
normal goods. Goods whose demand varies inversely with money income are called
inferior goods.
d) Prices of related goods: When two products are substitutes, the price of one
and the demand for the other move in the same direction. When two products are
complements, the price of one good and the demand for the other good move in
opposite direction. When two products are independent, price change of one may
have very little or no change in demand for the other.
e) Expectations: An expectation of higher future prices may cause consumers to buy now
in order to beat the anticipated price rises, thus increasing current demand.
Again, a change in expectations concerning future income may prompt consumers
to change their current spending.