Unit 3a: Exercise 3-3 - Effects of Change to Demand

There can be many causes for demand to change such as a change in a person's preferences, an increase or decrease in the income of consumers, expectations of the future and the price of related products.

I am definitely guilty of adjusting my demand for products based on upcoming raises (expectations of the future). When I know I'm going to have more money in the bank I will be more willing and able to buy items that I wouldn't normally purchase. For example, I might buy a $100 bottle of champagne to celebrate my raise, when usually I would opt for the $10 bottle of Baby Duck.

I was watching Conan the other night and he had an author on his show to promote his new book. As I was watching it I remember thinking "I bet the sales of this guy's book go through the roof because of this show". I even put it on my birthday wish list! The graph below depicts an increase in demand because of a change in preference (the viewers of the show, realizing they suddenly longed for this book). We are of course pretending that your local bookstore can increase the price of books and the quantity supplied quite easily.