Question

Suppose there exists a market for coffee that is in equilibrium at 500 cups brewed per week for $3/cup. Now suppose the demand for coffee shifts outward (to the right). What are some reasons this shift might have occurred?

Answer 1

Answer:

Increase in Substitute good price , Decrease in Complementary Good price, Fall in Income , Taste & preferences change in favour of good.

Explanation:

Demand is the ability & willingness of consumer to buy a product at a price , period of time.

There are four factors affecting Demand with following relationships with it : Price of Good (inversely related) , Price of related goods (substitutes-directly related) & (complements-inversely related), Income (directly related) , Taste & preferences (depends).

Any Change in 'Quantity Demanded' due to change in good's own price leads to movement on the demand curve (contraction or expansion). Any 'Change in Demand' due to factors other than price shifts the demand curve (rightwards or leftwards).

So : Increase in substitute good's price (eg- tea) price makes coffee relatively cheaper, Decrease in complementary good's price (eg - sugar/milk) makes coffee altogether cheaper, taste & preference change in favour of coffee consumption (eg- people learning advantages of caffaine consumption). All these mentioned Increase the Demand for coffee & shifts its curve rightwards.