Each of the following is a determinant of demand except:
Group of answer choices
tastes.
production technology.
expectations.
the prices of related goods.
The correct answer and explanation is:
The correct answer is production technology.
Explanation:
Demand in economics refers to the quantity of a good or service that consumers are willing and able to purchase at various prices within a specific period. Determinants of demand are factors that influence consumers’ willingness or ability to purchase a product. These factors include:
- Tastes and Preferences: Changes in consumer tastes and preferences significantly impact demand. For example, if a product becomes more fashionable or appealing, demand will likely increase.
- Expectations: If consumers expect the price of a product to rise in the future, they may buy more of it now, increasing current demand. Conversely, if they expect prices to drop, they may delay purchases, decreasing demand.
- Prices of Related Goods: The prices of substitutes (goods that can replace each other) and complements (goods consumed together) also affect demand. For example, if the price of coffee rises, demand for its substitute (like tea) might increase, while the demand for its complement (like sugar) might decrease.
Production technology, on the other hand, is not a determinant of demand. It is a determinant of supply. Production technology affects the efficiency and cost of producing goods. When technology improves, producers can make goods more efficiently, often at a lower cost, which may increase supply. However, it does not directly influence consumers’ willingness or ability to purchase goods, which is the focus of demand.
By understanding the distinction between determinants of demand and supply, businesses and policymakers can make better decisions about pricing, production, and market strategies. For example, focusing on improving technology will enhance supply, while changing marketing strategies or pricing will influence demand.