Draw a demand and supply diagram and show a shift in one of the curves (e.g. demand shifting outwards).

Give the students 5 minutes to think of as many causes of this shift.

1 point awarded for each correct cause; 3 points for one no one else has thought of.

12.1 came up with these 15 causes of demand shifting outwards:

1. increase in income – particularly luxury goods
2. increase in wealth (housing market or stock market boom)
3. increase in price of substitute
4. decrease in price of complement
5. increase in population
6. successful advertising campaign
7. anticipation/speculative demand – e.g. anticipation of scarcity
8. increase in popularity/fashion
9. Veblen effect – ‘snob’ effect, ‘must have’ good
10. change in legislation (e.g. compulsory safety equipment or emissions technology)
11. falling interest rates
12. easier credit availability
13. increase in quality of good
14. anticipation of inflation – consumers bring forward purchases
15. appreciation in exchange rate in market for imported goods which are a substitute for domestic goods

After the break we are doing the same for supply shifting inwards….. lots of good revision points already on linking the correct curve to the correct determinant!

Here are the answers for supply shifting inwards:

1. higher costs (wages, rent, raw materials, land, machinery/physical capital)
2. labour strike
3. natural disasters – particularly agriculatural-based/LEDCs
4. war
5. higher indirect taxes
6. lower or removal of susbidy
7. supply restrictions
8. cap on emissions
9. change in incentives away from producing this good
10. resources moved into other industries
11. increased scarcity of resource, e.g. oil – linked to higher costs
12. greater monopoly power/less competition
13. decrease in factor mobility
14. changing goal of seller – e.g. withdraw from particular market
15. appreciation in exchange rate increasing prices of imported raw materials and finished goods – ‘imported inflation’

Many thanks to Alex, Atin, Will, Clive, Arvin, Liam, Keval, Neal, Matt H, Matt S, Thomas…...

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