Question

identify three (3) non-price determinants that would shift the entire demand curve.

Answer 1

When the quantity demanded of a commodity changes because of a change in factors other than the own price of the commodity, it is called change in demand. Here, the price of the commodity remains the same. Change in demand causes the entire demand curve to shift indicating that more or less quantity is being demanded at the same price. As quantity demanded changes because of factors other than the own price, these factors are called non- price determinants. Three non- price determinants that would shift the entire demand curve are-

1) Income- Income of the consumer determines the quantity demanded of a commodity at a particular price. If Consumer's income increases, then more quantity is being demanded at the same price as with more income, more quantity can be purchased. When income increases, demand curve will shift to the right indicating that more quantity is being demanded at the same price. If Consumer's income decreases, less quantity is being demanded at the same price. As such, the demand curve will shift to the left indicating that less quantity is being demanded at the same price. Hence, as such demand curve will shift .

2) Population- when population increases, the demand for the commodity will increase by increasing the number of consumers. As such, the demand curve will shift to right indicating that more quantity is being demanded at the same price. If there is a decrease in the population, less buyers would be available to buy the commodity. As such, the demand for the commodity will decrease and demand curve will shift to the left indicating that less quantity is being demanded at the same price.

3) Consumers' expectations- Consumers'expectations about future prices, income , availability of goods , etc, play an important role in determining the demand for goods and services in the current period. If consumers expect a rise in the price of the commodity in near future, they would demand more amount of this commodity today in view to avoid purchasing it at a higher price in future. As such, demand for a commodity increases at the same price and demand curve will shift to the right. If consumers expect scarcity of certain goods in near future on account of expectation of strike or crop failure, the current demand for goods and services will increase. As such, the demand for the commodity will increase at the same price and demand curve will shift to the right.