Determinants That Cause The Demand Curve To Shift Economics Essay

Determinants That Cause The Demand Curve To Shift Economics Essay Demand means that the willingness of a buyers to buy a goods and able to buy a goods at a different price levels. The law states that the demand curve is a downward sloping graph which shows that there is a negative relationship between the price of a product and the quantity of a product. When a price of a product rises, the quantity demanded will decrease. On the other hand, when the price of a product falls, the quantity demanded will increase. Demand is a shift either rightward or leftward in the demand curve. Demand curve will shift leftward if the consumers decide to buy less, and the demand curve will shift rightward if the consumers decide to buy more. Decrease in demand will cause the demand curve to shift leftward. There are many determinants that cause the demand curve to shift. Price of coke $ Figure 5.1 D0 D1 Quantity of coke One of the determinants that cause the demand curve to shift is expectation. For example, if the price of a coke expected will fall next month, the quantity demand will also decrease. So, this is as shown in figure 5.1. As the demand decrease, the demand curve will definitely shift leftward from D0 to D1.Besides, the price of substitutes and complements good will cause the demand curve to shift. Complementary goods are good that are used together. For example, petrol and car. If the price of petrol rise, this will cause the quantity demand for car decrease. Substitute good are good that can be replaced with another good. For example, butter and margarine. If the price of butter fall, the quantity of margarine will definitely shift leftward. Besides, the taste and income will also cause the demand curve to shift. Quantity demand is a movement upward or downward in the demand curve. The only factor that will cause the movement is the price of the goods itself. For example, the price of an apples decrease from $2.50 to $1.90. This will cause the demand curve to move downward (from point A to B). Besides, the quantity demand definitely will increase from 4 to 7 as it applied the law of demand. As the price of an apple decrease, the quantity demanded will increase. This is shown in Figure 5.2. Price of an apple $ 2.50 A 1.90 B Figure 5.2 0 Quantity for apples 4 7 Part B Income elasticity of demand means that the percentage change in quantity demanded dividing the percentage change in households income. There are 3 types of degrees of income elasticity of demand (YED). If the income elasticity of demand is greater than 0, then this elasticity is a positive YED. But this positive YED is categorized into two types. First, if the quantity demanded of a good rise a smaller amount of percentage compare to the income of the households, this is known as a normal good. A normal good normally does not responsive to the changes in the quantity demanded of the good. This is also known as income elastic since (0