Asked Jan 20, 2019

What would cause a change in demand, and a change in supply?


Expert Answer

Step 1

Change in demand is caused by the demand factors other than price. Therefore the following factors affects the change in demand:

- Income: With the increase n income, the demand for goods increases

-Price of related goods: With the increase in price of substitutes, the demand of good increases. And with the increase in price of complimentary goods, the demandd of good decreases.

-Change in preferences: The favorable change in preference of consumer will increasse the demand and vice versa.

-Expectation of price in future: With the consumer of higher price in fture, the demand of goods increases and vice versa.


Step 2

Change in supply of goods will be caused by the factors other than price. Therefore, the following factors affects the change in supply:

-Cost of inputs: With the increase in price of inputs used in production, the margin of supplier reduces thus they will decrease the supply.

-Price of othe...

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