Which of the following are non-price determinants of demand such that a change in one shifts the demand curve? (check all that apply)
Production technology
Number of buyers
Tastes and preferences
Number of sellers
Input prices
Buyers’ Expectations
Buyers’ income
Prices of complements or substitutes
Sellers’ expectations
The correct answer and explanation is :
The correct non-price determinants of demand that shift the demand curve are:
- Number of buyers
- Tastes and preferences
- Buyers’ income
- Prices of complements or substitutes
- Buyers’ expectations
Explanation:
Non-price determinants of demand are factors other than the price of the good or service that can cause the demand curve to shift. These factors influence consumers’ willingness and ability to buy a good, even if the price remains unchanged. A shift in the demand curve means that at every price level, the quantity demanded changes.
- Number of buyers: An increase in the number of buyers (e.g., due to population growth or market expansion) leads to an increase in demand, shifting the demand curve to the right. Conversely, a decrease in the number of buyers reduces demand, shifting the curve to the left.
- Tastes and preferences: When consumer preferences change—such as a growing desire for healthier foods or trendy products—demand for those goods will increase, shifting the demand curve to the right. If preferences shift away from a good, demand decreases, shifting the curve to the left.
- Buyers’ income: When buyers’ income increases, they typically have more purchasing power, which leads to higher demand for normal goods (shifting the demand curve to the right). For inferior goods, an increase in income may decrease demand (shift the curve left) because consumers may opt for more expensive substitutes.
- Prices of complements or substitutes: The demand for a good is influenced by the prices of related goods. If the price of a complement (e.g., printers for computers) decreases, the demand for the good will increase (rightward shift). Conversely, if the price of a substitute (e.g., butter for margarine) decreases, the demand for the original good will decrease (leftward shift).
- Buyers’ expectations: If consumers expect prices to rise in the future, they may buy more now, increasing demand (shifting the curve right). Alternatively, if they expect prices to fall, they may hold off on purchasing, reducing demand (leftward shift).
Incorrect Non-Price Determinants:
- Production technology and input prices are related to supply, not demand. These affect the cost of production and the quantity supplied, not the quantity demanded.
- Number of sellers and sellers’ expectations are supply-side factors and do not affect the demand curve directly.
Thus, changes in the number of buyers, tastes and preferences, buyers’ income, prices of complements or substitutes, and buyers’ expectations all shift the demand curve.