What They Are

• Buyers' Income: The amount of income that buyers have available to spend on a good 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.


• Buyers' Preferences: The satisfaction buyers obtain from a good, based on buyers' preferences, wants, needs, likes, and dislikes, affects the willingness to purchase a good. If a good provides greater satisfaction, then buyers are inclined to purchase more.


• Other Prices: The demand for one good is based on the prices paid for other goods purchased by buyers. A change in the price of a substitute good (or substitute-in-consumption) induces buyers to alter the mix of goods purchased. An increase in the price of a substitute motivates buyers to buy more of one good and less of the substitute good. A change in the price of a complement good (or complement-in-consumption) induces buyers to demand more or less of both goods. An increase in the price of a complement motivates buyers to buy less of one good as they buy less of the complement good.


• Buyers' Expectations: The decision to purchase a good today depends on expectations of future prices. Buyers seek to purchase the good at the lowest possible price. If buyers expect the price to decline in the future, they are inclined to buy less now. If they expect the price to rise in the future, they are inclined to buy more now.


• Number of Buyers: The number of buyers willing and able to buy a good affects the overall demand. With more buyers, there is more demand. With fewer buyers, there is less demand.

How They Work

The demand determinants are assumed constant for two reasons:

• One: To isolate the law of demand relation between demand price and quantity demanded


• Two: To systematically analyze what happens to demand when each determinant changes.

Demand Determinants

Now, consider how changes in the demand determinants shift the demand curve. A change in any of the five determinants can cause either an increase in demand or a decrease in demand.

• Increase in Demand: An increase in demand is a rightward shift of the demand curve. An increase in demand means that for any price, for every price, buyers are willing and able to buy more of the good. Click the [Increase] button to demonstrate.


• Decrease in Demand: A decrease in demand is a leftward shift of the demand curve. A decrease in demand means that for any price, for every price, buyers are willing and able to buy less of the good. Click the [Decrease] button to demonstrate.

Two Changes

• A Change in Demand: This a change in the overall demand relation, a change in all price-quantity pairs. It is caused by a change in one of the five demand determinants and is indicated by a shift of the demand curve.


• A Change in Quantity Demanded: This is a change in the specific amount of the good that buyers are willing and able to purchase. It is caused by a change in the demand price and is indicated by a movement along the demand curve from one point to another.