Jmericans in Action

Many factors influence the demand for goods and services. One of these is changes in income. When your income goes up, you can afford to buy more goods and services. A TIME article described what happened in November 2001 when income fell: "Surveys find that households are planning to spend some $28 less than 2000's $490 average [on holiday presents) Retail Forward Inc. forecasts a drop of 1.5 percent in the season s sales of apparel, furniture, consumer electronics, and other general merchandise over last season's The reason for all the gloom and doom is obvious: Unemployment numbers are rising ... and the current pop psychology says folks will be thinking more about spending time with friends and family than throwing a lot of money at them." Buyjng fewer gjfts this year

452 Chapter 20 Demand

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Changes In the Number of Consumers

Demand for a good in a particular market area is related to the number of consumers in the area. The more consumers, the higher the demand; the fewer consumers, the lower the demand. Suppose a company puts up a new apartment building and the building is soon filled with families. These new residents begin to buy products and services from area businesses. As a result, demand for gasoline., food, and video rentals in this area will go up. In this case, the demand curve will shift to the right.

The same factor can causc a change in the opposite direction. When many people move out of an area, demand for goods and services goes down. Here the demand curvc shifts to the left.

The number of consumers in a particular market area may change for a number of reasons. A higher birthrate* increased immigration, or the migration of people from one region to another increases the number of consumers. Factors such as a higher death rate or die migration of people out of a region can also cause the number of consumers to fall.

Changes In Consumers' Income

Demand also changcs when consumers' income changes. When the economy is healthy, people receive raises or move to better-paying jobs. With more money to spend, they are willing to buy more of a product at any particular pricc.

Again, the opposite can happen* too. In economic hard times, people lose their jobs. They have less income to spend, and so demand goes down.

Changes In Consumers' Tastes

Changing tastes can affect demand as well. When a product becomes popular* perhaps through an advertising campaign, the demand curve shifts to the right. More people are willing to buy the product at a particular pricc. We often see this during the holiday shopping season when a new product becomes the "must-buy" of the year.

Many products, though, fade in popularity over time. When that happens* the demand curve shifts to the left. This shows that people arc less willing to spend money on those products.

A Change in Demand

DECREASE IN DEMAND

New Curve

Original Curve

75 150 225 300 375 450 QUANTITY

350 SAO

Analyzing Graphs

INCREASE IN DEMAND

Jump in * Demand

New -Curve

Original ^

150 225 300 375 450 QUANTITY

A change In demand means that a different quantity Is demanded at each and every possible price In the market.

What happens to the demand curve when demand Increases?

Changes In Consumers' Expectations

"Expectations" refers to the way people think about the future. For example, suppose that a leading maker of audio products announces a technological breakthrough that would allow more music to be recorded on a smaller disk at a lower cost than before, liven if the new product might not be available for

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