Thursday, October 30, 2008

Factors Affecting Demand

When we discuss markets with students, we like to talk about the factors that affect the components - essentially, what can move the curve to the right or to the left. We do this because our students tend to see price as the main factor. But we often have to remind them that changes in price move us up or down an existing curve. The question we then repeat is "what shifts the curve?"

When we explore further, we often get to the main determinants. Income, prices of related goods (substitutes & complements), tastes, expectations, and changes in the size of the market (number of buyers).

The current state of the economy is having an impact on prices in a number of areas. But one of the more relevant to your students may be college. Changing incomes and the continuing high price of education is changing the choices people make from where to go to school to what to study. This article from today's issue of The Wall Street Journal provides excellent examples of how price affects choices, and how income and expectations can affect the demand component of price. I think it would provide an excellent place to start a discussion reviewing demand and shifting demand.

What do you think? Can you think of or recommend other pieces to go along with this one?

1 comment:

Jason Welker said...

Thanks Tim, always looking for good articles to use for teaching Demand and its determinants!

Looking forward to meeting you in Richmond next week!