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Changes in demand |
Increase in Demand |
Decrease in Demand |
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First, a demand
(or supply) determinant changes. |
Change in Factors Other Than Price 1. Increase in Taste increases the demand curve. |
Change in Factors Other Than Price 1. Decrease in Taste decreases the demand
curve. |
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Second, this determinant change causes the demand curve (or supply curve) to shift. |
2. Increase in population increases the demand curve. |
2. Decrease in population decreases the demand curve. |
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Third, the change in demand (or supply) causes either a shortage or a surplus imbalance in the market. The market is in a temporary state
of disequilibrium |
3. Increase in income in income increases demand if a normal good. |
3. Increase in income decreases demand if an inferior good. |
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Fourth, the shortage and surplus imbalance causes
the price of the good to change. |
4. Decrease in income increases demand if an inferior good. |
4. Decrease in
income decreases income if a normal good. |
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Fifth, the change in price causes a change in quantity
demanded (and supplied). |
5. Increase in price of substitute (Pepsi) increases
demand for good (coke). |
5. Decrease in price of substitute (Pepsi) decreases demand for good (coke). |
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·Sixth, the change in quantity demanded (and supplied)
eliminates the shortage or surplus and restores market equilibrium. |
6. Decrease in price of complement (beer) increases demand for good (pizza). |
6. Increase in price of complement (beer) decreases demand for good (pizza). |