how change in "Consumer Taste" and "Change in Expectation" effect upon Supply and Demand in Economic?
In a plenitude of ways. Fashion and other fads come and go, increasing the demand for "hot" products, decreasing for "cold." Producers, in an attempt to make production decisions, try to predict what the future holds with respect to expected demands and expected input costs. If you think about it, Im sure you could come up with examples of how consumer tastes and producer expectations affect supply and demand.
Consumer taste and change in expectations can have significant effects on supply and demand in economics. Here's how:
1. Change in consumer taste: Consumer taste refers to the preferences and desires of consumers for certain products or services. When consumer tastes change, it can significantly impact demand.
- Increase in consumer taste: If there is a positive change in consumer taste, where consumers develop a greater liking or preference for a particular product, it will lead to an increase in demand. This can be seen with the popularity of certain fashion trends, electronics, or food items.
- Decrease in consumer taste: Conversely, if there is a negative change in consumer taste, where consumers develop a lesser liking or preference for a product, it will result in a decrease in demand. For example, a decline in demand for flip phones due to the rise of smartphones.
2. Change in expectations: Expectations play a crucial role in how businesses operate and influence the decision-making process.
- Change in supplier expectations: If suppliers or producers expect an increase in consumer demand for a particular product in the future, they may increase their supply in anticipation. This can be seen during holiday seasons when suppliers produce more in anticipation of higher sales.
- Change in price expectations: If suppliers expect an increase in the price of inputs, such as labor or raw materials, they may reduce their supply in the market to avoid potential losses. This can be observed when oil prices rise, leading to reduced supply of gasoline.
Overall, changes in consumer taste and expectations can impact supply and demand in the following ways:
- Increase or decrease in demand: Changes in consumer taste will lead to an increase or decrease in demand for specific products.
- Changes in supply: Expectations of suppliers can impact their production decisions, resulting in changes in the supply of goods and services.
To understand the specific impact of these factors on supply and demand in economics, you can analyze market trends, conduct surveys, analyze consumer behavior data, or observe patterns in past market behavior. These methods will help you gain insights into how changes in consumer taste and expectations can affect supply and demand dynamics.