Determinants of Demand NON-price factors that change demand for a product. Shifts the demand curve (left or right)

Consumer Tastes and Preferences Popularity, “cool factor” When a product becomes more popular, demand increases When a product becomes less popular, demand decreases

Market Size When more businesses enter an industry, market size increases and more products become available. When market size increases, demand increases When market size decreases, demand decreases

Income The money a person earns affect his/her demand for goods/services When income increases, demand increases When income decreases, demand decreases

Substitute Goods A product that can be substituted for or replace another Examples – margarine and butter, chicken and turkey When the demand for a substitute good increases, demand for the original good will decrease. When the demand for a substitute good decreases, demand for the original good will increase.

Complementary Goods A product that compliments or “goes with” another product Examples – paint and paint brushes, hot dogs and hot dog buns When demand for a complementary good increases, demand for the original good also increases. When demand for a complementary good decreases, demand for the original good also decreases.

Consumer Expectations Reacting to an expected change in price or quality (future) If consumers believe the price of a product will decrease tomorrow, their demand today will decrease. If consumers believe the price of a product will increase tomorrow, their demand today will increase.