Index
The Demand Curve 1
The Demand Curve 2
The Demand Curve 3
The Laws of Supply and Demand - 4
The Laws of Supply and Demand - 5
A ''Contraction'' of Demand - 6
''Ceteris Paribus'' - 7
An ''Expansion'' of Demand - 8
Marginal Utility - 9
Marginal Utility - 10
Marginal Utility - 11
Marginal Utility - 12
Consumer Surplus - 13
Consumer Surplus - 14
Price Discrimination - 15
An ''Expansion'' of Supply - 16
An ''Expansion'' of Supply - 17
Market Equilibrium - 18
Market Equilibrium - 19
Market Equilibrium - 20
Movements of the Demand Curve - 21
Movements of the Demand Curve - 22
Movements of the Demand Curve - 23
Inferior Goods - 24
Movements of the Demand Curve - 25
Movements of the Supply Curve - 26
Movements of the Supply Curve - 27
Movements of the Supply Curve - 28
The Income Effect - 29
The Substitution Effect - 30
The Substitution Effect - 31
The Substitution Effect - 32
The Substitution Effect - 33
Complements - 34
Complements - 35
Review: Factors Effecting Demand - 36
Review: Factors Effecting Demand - 37
The Goals of Firms - 38
The Goals of Firms - 39
To: Elasticity

Review : Factors Effecting Demand - 37

Other factors include:

  • changes in the prices of substitutes. If the price of a substitute falls, then demand for the good or service will also fall (or contract, to use the correct terminology).

  • changes in the prices of complements. If the price of a complement rises, then the demand for the good or service will fall (or ''contract'').

  • changes in the size and age distribution of the general population. As Australia's population is rapidly aging (as a result of smaller numbers of children per family), demand for many goods and services demanded by older people has risen. For example, in the building industry, there has been an increase in demand for retirement homes, and ''medium density'' housing.

  • changes in interest rates and the general availability of credit. Many households finance consumption through borrowing. If interest rates rise, demand contracts for many goods and services; particularly housing.

  • advertising and changes in fashion can have a market effect on demand. Indeed, producers of goods that are close substitutes generally spend large amounts on advertising, reminding consumers that their product is ''better'' than the opposition's product. (Whether or not this is reality true, of course is another matter).

  • seasonal changes. For example, demand for icecreams rises in warmer weather, and falls in the colder months of the year.

  • changes in technology. Firms are constantly attempting to gain greater sales through improvements in the quality and features of their product. This is seen clearly in the computer market. The introduction of a new personal computer with a bigger memory chip or a faster operating speed soon results in prices of older model computers rapidly falling.

  • consumer expectations also effect demand. People tend to maintain high levels of consumption when they feel confident about their continuing employment in the future. If people, for whatever reason, feel less confident about the future, they tend to decrease consumption and increase saving.
    If households believe that inflation will rise in the future, or that government taxes will rise, they will increase their demand for many goods and services, to ''beat'' the price rise.