Introduction
Increase or decrease in various factors such as income of people, price of substitutes, rise or fall in the number of buyers, marketing and promotional activities etc. increase or decrease the demand of products or services. Therefore, these factors cause shift in the demand curve (either shift to left or shift to the right). This post highlights the major factors that cause the change.
What are the main factors causing shift in the demand curve ?
The major factors that are responsible for shift in the demand curve can be highlighted as follows:
1. Consumer's Income
If the income of consumers increases the demand rises and demand curve shifts to the right. If income decreases then demand falls and demand curve shifts to the left. Therefore, income is the key factor that causes shift in the demand curve.
4. Advertisement
2. Price Of Substitutes
Price of substitutes products also causes the shift in demand curve. It the price of substitutes increases, the demand for related products increases and demand curve shifts to the right and vice versa.
3. Number Of Consumers
Demand increases with the rise in the number of buyers and decreases with the fall in the number of buyers. This also causes shift in the demand curve.
Advertisement helps to attract more consumers which leads to rise in demand. Therefore, advertisement helps to shift demand curve to the right.
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5. Tastes And Preferences
Consumers' preferences and tastes change due to advertising, trends or public opinions that leads to change (increase or decrease) in demand of certain products and services that causes change in demand curve also.
6. Tax Policy
Tax policy is also the factor that influence the demand curve. If the tax rate is increased demand for the product will decrease and demand curve shifts to the left and vice versa.
7. Future Expectations
Current demand of the product may rise if consumers expect prices to rise in the future. This leads to shift demand cure rightward.
