Demand shifters affects the price and outputs
of a product or service. When demand shifters change, they cause shifts in the demand curve, which in turn leads to changes in both the price and output level of the product or service.
Demand shifters can be divided into five main categories:
1. Consumer preferences: Changes in consumer tastes and preferences can lead to shifts in demand. For example, if a new fashion trend becomes popular, the demand for clothing items related to that trend will increase.
2. Income: Changes in income levels can also affect demand. When consumers experience an increase in income, they may be willing to spend more on certain goods and services, leading to an increase in demand.
3. Population: Changes in population size or demographic characteristics can impact demand. For example, an aging population may have different demands for healthcare services compared to a younger population.
4. Price of related goods: The prices of substitute or complementary goods can influence demand. If the price of a substitute product decreases, consumers may switch to that product, leading to a decrease in demand for the original product.
5. Future expectations: Consumer expectations about future prices, income, or availability of a product can also affect demand. For instance, if consumers expect the price of a product to increase in the future, they may increase their demand for it in the present.
When any of these demand shifters change, the demand curve will shift to the right or left. A shift to the right indicates an increase in demand, which leads to an increase in both price and output. Conversely, a shift to the left indicates a decrease in demand, resulting in a decrease in both price and output.
Overall, demand shifters play a significant role in determining the equilibrium price and output level of a product or service in the market.