Determinants of Demand Incomes For most goods, the quantity demanded at any price rises with income. Goods that have this property are called normal goods. So-called inferior goods (such as ground beef with high fat content) are the exception. For such goods, the quantity demanded at any price falls when income rises. The idea is that consumers abandon these goods in favor of higher-quality substitutes (such as leaner grades of meat in the ground beef case) as soon as they can afford to. Tastes Tastes vary across people and over time. In Western societies, culture instill a taste for site ting on padded furniture, whereas in many Eastern societies, people are conditioned to favor sitting cross-legged on the floor, The demand for armchairs thus tends to be larger in the West than in the East. By the same token, the demand for skirts with hemlines above the knee tends to vary sharply from one decade to another Prices of Substitutes and Complements Bacon and eggs play « complementary role inthe diets of some people. For them, a sharp increase in the price of bacon leads not only to a reduction in the quantity of bacon ‘demanded but also to a reduction in the demand for eggs. Such goods are considered complements: An increase in the price of one good decreases demand for the other good, Inthe case of close substitutes, such as coffee and tea an increase inthe price of one will tend to increase the demand for the other. Expectations Expectations about future income and price levels also affect current purchase decision. For example, someone who expects higher future income is likely to spend more today than an otherwise identical person who expects lower future income. (After all, with higher expected future income, the need to save diminishes.) Similarly, people wil often accelerate their current purchases of goods whose prices are expected to rise in the months to come, Population In general, the number of people who buy a product grows as the number of potential buyers grows. Thus, in cities with growing populations, the demand for housing increases from year to year, whereas it tends to fall in cities with declining populations.Price of complement falls, Pp 2S o Population grows Figure 2.8 graphically displays some factors that shift demand curves. We will revisit Price of substitute Price increase expected DETERMINANTS OF SUPPLY AND DEMAND Pp | 2s a ° Income rise, Income ses, fas oral good inferior good expected these factors in more detail in Chapters 4 and 9 FIGURE 2.8 Factors That Shift Demand Curves, Prices of substitutes and ‘complements, incomes, population, expectation of future price and income changes, and tastes all influence the positon of the current demand curve for a product 3Changes in Demand versus Changes in the Quantity Demanded | ‘When economists use the expression change in demand, they mean a shift in the entire ‘demand curve. Thus, when the average income level of buyers changes, the demand curve shifts—there is a change in demand, When we say change in the quantity demanded, we DETERMINANTS OF SUPPLY AND DEMAND mean a movement along the demand curve. When the price of a good falls, for example, the result is an increase in the quantity demanded, not an increase in demand. Analogous interpretations attach to the expressions change in supply and change in the quantity supplied. These terminological distinctions are important for clear commu- fon both in classroom discussion and on exams. And if the experience of previous nicat requires effort to keep them straight. generations of students is any guide,