Question

What are the factors that causes an increase (rightward or upward shift) in demand and supply of Chocolate Bars and High End Luxury cars (Write down at least 5 points each for demand and supply.

Answer 1

The increase in demand for chocolate (normal good) could be due to following reasons

1. The price of substitute goods rises. Substitute goods are those which can perfectly replace the main good. So if price of substitute chocolate rises the demand for chocolate rises

2. Rise in income of consumer

3. Fall in price of complimentary good - complementary are goods which are used together with the main good

4. Future price of chocolate Is expected to rise

5. The population increases

Increase in demand for high end luxury cars might be due to following reasons

1. Increase in income of the consumer

2. Increase in number of wealthy consumers

3. Change in taste and preference of consumer

4. Digital growth

5. New and emerging markets

Increase in supply of chocolate or luxury goods might be due to following reasons

1. Decrease in price of raw material to manufacture chocolate

2. Improved and cheap technology to produce

3. Reduction in taxes or increment in subsidies

4. Increase in number of sellers

5. Price expectations