List the factors that influence demand Indicate in each case

List the factors that influence demand. Indicate, in each case, whether it causes a shift in, or a movement along, the demand curve. [5 points] : 3(12pt) : :-. E.. T . TTT ? Paragraph Arial Words:0 Path: p

Solution

Factors that influence demand:

I) Price - price of the good is not a determinant of demand for the good. But change in price causes a movement along demand curve as demand curve shows the negative relationship between price and quantity demanded.

ii) income or wealth - change in income or wealth shifts the demand curve as they are determinant of demand. An increase in income will lead to increase in demand and shift the demand curve rightward as people now have more money to spend.

iii) price of substitute good- it\'s another determinant of demand. An increase in price of substitute good of good \'a\' will increase the demand for good \'a\' as people will consume less of that substitute good and more of good \'a\'. It will increase demand for good \'a\' and demand curve will shift to the right. The opposite is true when price of substitute good decline

Iv) Price of Complementary good- An increase in price of Complementary good will decrease demand for a good (as complementary means both goods are consumed together) and it will shift the demand curve leftward. Opposite is true when price of complementary good decreases.