Question

Supply and demand are powerful forces in a free market.

Answer 1

Answer: Some of the factors that causes a shift in the demand and supply curves are;

(1) Income of the consumers

(2) Change in consumers’ preferences

(3) Price of substitute commodities

(4) Population

Step-by-step explanation: A shift in the demand or the supply curve means a complete movement of the entire curve either to the left or to the right (it must not be confused with a ‘SHIFT ALONG THE DEMAND CURVE’).

One of the factors responsible for this is a change in the income of consumers, because when the consumers’ income increases slightly their purchasing power increases thereby their total quantity demanded would experience an increase.

Also when the taste or preference of the consumers change, it would translate into a different demand entirely. That is, if the consumers begin to have a preference for a brand of a commodity, it simply means they will increase their demand for that commodity and demand less for the one currently being purchased. In other words, the demand curve for the preferred commodity would shift to the right (increase), while the demand curve for the less preferred one would shift to the left (decrease).

Another factor is price of close substitutes. As one commodity is being demanded, another commodity that can satisfy the same purpose is also being demanded. However, the demand for one is usually higher than the other. So if the price for a substitute becomes less, consumers would tend towards that one and the demand for the preferred one would shift to the left. Take detergents for example, if the price of detergent ABC falls low, and consumers have been buying detergent XYZ all along, provided detergent ABC washes clean like XYZ, the demand for ABC would increase and would be depicted as a shift to the right.

Yet another factor is population of the consumers, and this is so because as the population of consumers increases in the market, the total quantity demanded also increases, thereby resulting in a shift in the market demand. It is very important to note that these factors equally apply to the shifts in the supply curves as well.

Answer 2

Answer: Answer from e d g e n u i t y 2020

Shifts in supply and demand occur when the amount of goods available increases or decreases, or when the demand for a particular good increases or decreases. Shifts in supply can happen when consumers change their spending habits, when competitors produce similar goods, or when the availability of labor or resources changes. Shifts in demand occur when the price changes or when the number of people trying to buy the good changes. It can also happen when people's tastes change.

Step-by-step explanation: