Factors affecting demand

1. Tastes and preferences

• Consumers wants and the intensities of wants change

2. Prices of related goods

• Cheaper/better substitutes decrease demand

3. Income

• For normal goods, higher income increases demand

• For inferiour goods, higher income decreases demand

4. Expected future prices

• Increases demand if future prices are expected to go up

5. Number of consumers

• More consumers = more demand

Factors affecting supply

1. Technology

• More efficiency = increase supply

2. Environment

• Good crop years, hurricanes, droughts, etc.

3. Price of inputs/costs of production

• A fall in costs of production increases supply

• Includes prices of raw goods

4. Prices of related products/services

• When alternative products/services rise in price, businesses supply less

5. Expected future prices

6. Number of businesses