Factors Affecting Demand.

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• published: 11 Dec 2014
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Transcript: Let’s imagine we are all consumers. What makes us want to buy more apples or fewer apples? Prices. At $2, we’ll say, nah, it’s too expensive. Let’s just get 1. But if the price drops to $1, we’ll say, cool, let’s get 3 apples now. Tastes and preferences. Hey, I saw an advert today. Apples are good for health. All of a sudden, I want to buy more apples. When tastes shift towards apples, demand for apples increases. Price of complements. We say goods are complements of each other when they are normally bought together. For example, printer and ink cartridges. Or bread and jam. If bread gets cheaper, what happens to our demand for jam? Well, bread gets cheaper, we buy more bread, so we’ll buy more jam. Price of substitutes. Substitutes are goods that are bought for the same purpose. For instance, Pepsi and Coke are substitutes. When price of Pepsi drops, we’ll start to think, hey, let’s buy fewer cans of Coke and switch to Pepsi. They are the same thing anyway. So when price of Pepsi drops, demand for coke decreases. Income. You know, we all have this lust for material stuff? And we think that when we make more money, we are going to buy more of this and this and that? These type of goods are called normal goods. When our income increases, we want to get more normal goods like cars. There’s another category of goods called inferior goods. For example, food from roadside stalls. Perhaps your income increases and think, this food is inferior! You have more money, you want to eat in a restaurant now. When our income increases, we demand fewer inferior goods. Expectation of prices. “There’s a drought going on in Thailand. Shortage of rice in the near future is expected”. Crap, no rice? Man, I think price of rice is going to increase. Better go buy and stock up some rice now. So if we think future prices of rice will increase, our demand for rice today increases. Population. When the number of people on an island increases, the demand for houses increases. When population increases, demand for something will increase. So this is the summary. But hey, there are so many factors affecting demand. I’m getting confused. How do I graph the demand curve? If you like this video, remember to like and subscribe. Next up: The demand curve. _____________________________________________________