Shifts in Market Demand

This study note looks at the causes of shifts in market demand

Key summary

Give me 5 reasons why demand may increase (i.e. the demand curve shifts to the right)

• Increasing income (for normal goods)
• Decreasing income (for inferior goods)
• Rising price of substitutes
• Falling price of complements
• Effective advertising

Give me 5 reasons why demand may decrease (i.e. the demand curve shifts to the left)

• Change in consumer tastes and preferences away from the product
• Rise in interest rates leading to a fall in demand for products bought on credit
• Expected fall in prices leading consumers to delay their purchases
• A rise in unemployment during a recession
• A rise (appreciation) in the exchange rate which makes import (substitutes) cheaper