Google
Saturday 
November 28, 2020 

AmosWEB means Economics with a Touch of Whimsy!

AmosWEBWEB*pediaGLOSS*aramaECON*worldCLASS*portalQUIZ*tasticPED GuideXtra CrediteTutorA*PLS
AGGREGATE SUPPLY SHIFTS: Changes in the aggregate supply determinants can shift either the short-run aggregate supply curve and the long-run aggregate supply curve. The mechanism is comparable to that for market supply determinants and market supply. We have two options -- an increase in aggregate supply and a decrease in aggregate supply. An increase in resource quantity or quality or a decrease in resource prices shift the aggregate supply curves to right. A decrease in resource quantity or quality or an increase in resource prices shift the aggregate supply curves to left.

Visit the GLOSS*arama


BUYERS' INCOME, DEMAND DETERMINANT:

The income that buyers have available to purchase a good, which is assumed constant when a demand curve is constructed. Buyers' income is one of five demand determinants that shift the demand curve when they change. The other four are buyers' preferences, other prices, buyers' expectations, and number of buyers.
Buyers' income affects the ability to purchase a good. In general, income has a direct affect on the ability to buy a good, that is, more income means more buying. However, income can actually affect demand in two ways. For normal goods, more income means more demand. For inferior goods, however, more income means less demand.

Normal and Inferior

When it comes to the buyers' income demand determinant, goods fall into one of two types--normal and inferior.
  • Normal Good: A normal good exists when buyers are inclined to buy more of the good if they have more income. A normal good is so named because it represents the typical, or "normal" situation. An increase in income means buyers have a greater ability to purchase goods. As such, buyers are "normally" inclined to buy more if they have more income.

  • Inferior Good: An inferior good exists when buyers are inclined to buy less of the good if they have more income. An inferior good is so named because it tends to be less expensive than more desirable goods. As such, when buyers have more income and can afford to buy the more expensive products, then they reduce their purchases of the inferior goods.

Shifting the Demand Curve

Buyers' Income

Normal Good

Inferior Good

A change in buyers' income causes the demand curve to shift. This can be illustrated using the negatively-sloped demand curve for Wacky Willy Stuffed Amigos presented in this exhibit. This demand curve captures the specific one-to-one, law of demand relation between demand price and quantity demanded. Buyers' income is assumed to remain constant with the construction of this demand curve.

Now, consider how changes in buyers' income shifts the demand curve. The demand curve is affected in a different way for normal goods than for inferior goods.

  • Normal Good: An increase in buyers' income causes an increase in demand and a rightward shift of the demand curve for a normal good. Click the [Income Increase] button under the Normal Good heading to demonstrate.

    A decrease in buyers' income causes a decrease in demand and a leftward shift of the demand curve for a normal good. Click the [Income Decrease] button under the Normal Good heading to demonstrate.


  • Inferior Good: An increase in buyers' income causes a decrease in demand and a leftward shift of the demand curve for an inferior good. Click the [Income Increase] button under the Inferior Good heading to demonstrate.

    A decrease in buyers' income causes an increase in demand and a rightward shift of the demand curve for an inferior good. Click the [Income Decrease] button under the Inferior Good heading to demonstrate.

Not the Income Effect

The buyers' income demand determinant needs to be distinguished from a seemingly similar notion, the income effect.
  • Buyers' Income Demand Determinant: Buyers' income is a demand determinant that affects the ability to purchase a good, given no change in the price of the good. The change in buyers' income causes a change in demand and a shift of the demand curve. With the buyers' income demand determinant, price is fixed and income changes.

  • Income Effect: The income effect results from a change in demand price, which affects the purchasing power of a given amount of income. The change in purchasing power then causes a change in quantity demanded and a movement along the demand curve. With the income effect, price changes and income is fixed.

<= BUYERS' EXPECTATIONS, DEMAND DETERMINANTBUYERS' MARKET =>


Recommended Citation:

BUYERS' INCOME, DEMAND DETERMINANT, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2020. [Accessed: November 28, 2020].


Check Out These Related Terms...

     | demand determinants | buyers' preferences, demand determinant | other prices, demand determinant | buyers' expectations, demand determinant | number of buyers, demand determinant | normal good | inferior good | supply determinants |


Or For A Little Background...

     | demand | market demand | demand price | quantity demanded | law of demand | demand curve | change in demand | change in quantity demanded | ceteris paribus |


And For Further Study...

     | Marshallian cross | comparative statics | competition | competitive market | market | consumer surplus |


Search Again?

Back to the WEB*pedia


APLS

BLACK DISMALAPOD
[What's This?]

Today, you are likely to spend a great deal of time touring the new suburban shopping complex trying to buy either a T-shirt commemorating the second moon landing or a coffee cup commemorating Thor Heyerdahl's Pacific crossing aboard the Kon-Tiki. Be on the lookout for defective microphones.
Your Complete Scope

This isn't me! What am I?

The 22.6% decline in stock prices on October 19, 1987 was larger than the infamous 12.8% decline on October 29, 1929.
"The world is not dangerous because of those who do harm but because of those who look at it without doing anything. "

-- Albert Einstein, physicist

ANOVA
Analysis of Variance
A PEDestrian's Guide
Xtra Credit
Tell us what you think about AmosWEB. Like what you see? Have suggestions for improvements? Let us know. Click the User Feedback link.

User Feedback



| AmosWEB | WEB*pedia | GLOSS*arama | ECON*world | CLASS*portal | QUIZ*tastic | PED Guide | Xtra Credit | eTutor | A*PLS |
| About Us | Terms of Use | Privacy Statement |

Thanks for visiting AmosWEB
Copyright ©2000-2020 AmosWEB*LLC
Send comments or questions to: WebMaster