Factors Effecting Demand

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Factors Effecting Demand by Mind Map: Factors Effecting Demand

1. What causes the Movement along the Demand Curve

1.1. Change in price.

2. What causes the Shifts in the Demand Curve

2.1. 1. Income

2.1.1. An increase in disposable income enabling consumers to be able to afford more goods.

2.1.2. Higher income could occur when there is higher wages and lower taxes.

2.2. 2. Quality

2.2.1. An increase in the quality of the good encourage people to buy one.

2.3. 3. Advertising

2.3.1. Can increase brand loyalty to the goods and increase demand.

2.3.2. Example: higher spending on advertising by Coca Cola has increased global sales.

2.4. 4. Substitutes

2.4.1. An increase in the price of substitutes.

2.4.2. Example: if the price of Samsung mobile phones increases, this will increase the demand for Apple iPhones- a major substitute for Samsung

2.5. 5. Complements

2.5.1. A fall in the price of complements will increase demand.

2.5.2. Example: a lower price of Play Sation 2 will increase the demand for compatible Play Station games.

2.6. 6. Weather

2.6.1. In cold weather there will be increased demand for fuel and warm weather clothes.

2.7. 7. Expectations of future price increase

2.7.1. If you think the price of one good will increase in the future, you will buy the good now.

3. Evaluation

3.1. For some luxury goods, income will be and important determinant of Demand.

3.2. Example: if your income increased you would buy more restaurant meals but probably not more groceries.

3.3. Advertising is important for goods in which branding is important.

3.4. Example: advertising soft drinks instead of bananas.

4. Other types of Demand

4.1. Effective demand: this occurs when a consumers desire to buy a good can be backed up by his ability to buy it.

4.2. Derived demand: this occurs when a good or factor of production such as labour is demanded for another reason.

4.3. A Giffen good: a good where an increase in price of a basic item leads to an increase in demand because very poor people cannot afford any other luxury goods.

4.4. Composite demand: a good which is demanded for multiple different uses.

4.5. Joint demand: goods bought together like printer and printer ink.