Question

Demand is a powerful force in a free market. In three to four sentences, explain some of the factors that cause changes in demand and why it is important for consumers to understand these changes.

Answer 1

Demand changes when the quantity demanded at every price changes. This happens when consumers’ willingness and ability to buy changes. Demand shifts can be caused by changes in income and in consumer tastes and preferences. Demand is also influenced by changes in the price of a complementary good or in the price of a substitute. Demand shifts cause changes in markets. When consumers understand the basics of demand they understand that their buying choices are important. Consumer demand influences which goods and services are available, the quantities available, and the prices of the goods and services we buy.

Answer 2

The Factors that affect the demand are First, Willingness to buy convey a desire, based on what economists call tastes and preferences.  You may need nor want something, you will not buy it then the Ability to buy convey that income is important. Second, size or composition of the population can affect demand. The more children a family has, the greater their demand for clothing. There is a need for the Consumer to understand the changes because if there is greater demand there is a greater supply.