Other Factors




Income effects.  The effect of income is directly related to the type of good that consumer is considering.  If the good is a normal good then an increase in income would increase demand of the good.  Most goods are normal goods.  If the good is an inferior good then an increase in income would cause demand for the good to fall.  An inferior good is usually one of very poor quality or is extremely inexpensive.  An example of an inferior good is beans.  As peoples income increases they tend to eat less beans and more of other goods.

Population and preferences have very straight forward effects on demand.  As the population of a society increases the demand for goods increases.  As preferences change demand changes to reflect the increased or decreased popularity of the good.  For example, 20 years ago teal was not a popular color, so the demand for teal was very low.  Today, teal is a very popular color so the demand for teal has increased.  As peoples preferences shift towards a good the demand for that good increases.

One thing that should be noted is that individuals determine the types of goods.  What may be an inferior good in the U.S. may not be an inferior good in other countries.  The same is true of complementary and substitute goods.  For example, in the U.S. the potato is an inferior good, as peoples income increases they begin to substitute for the potato in their meals (like using rice).  This is not true in China.  In China, rice is the inferior good and as income increases the Chinese tend to substitute the potato for rice.  When trying to classify a good as inferior or normal you must take into consideration the preferences of the country.

Hosted by www.Geocities.ws

1