Define the non-price factors/causes of change in demand or demand shifter
Define the non-price factors/causes of change in demand or demand shifter
1. Change in income. When the income of the consumers increases, it generally leads to an increase in the demand for some commodities and a decrease in the demand for some commodities.
2. Change in Population. When population of a country increases, the demand for all goods rises even though prices of the products may or may not change.
3. Change in tastes or fashion. Demand for a commodity may change due to changes in tastes and fashions e.g. people develop a taste for tea instead of coffee. There is then an increase in the demand for tea. The demand curve shifts to the right of the original demand curve.
4. Change in quantity of money. When the quantity of money in a country increases, the demand for goods rises. On the other hand decrease in quantity of money causes fall in demand. e.g. if banks provides credit facilities on low rate, demand for many goods rises.
5. Changes in price of substitutes. It the price of a commodity rises, people may stop further purchase of that commodity and spend money on its substitute which is available at a lower price.
Income distribution. When there is an unequal distribution of wealth in a country, the aggregate demand for consumer goods falls. But with an attempt to equalize the income distribution, money is transferred from the rich to the poor. In this case, the demand for consumer goods rises.
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